Investing In Mortgage Notes Can Earn You Money While You Sleep

by Sep 15, 2021

When it comes to growing your money and earning more income, investing your cash in worthwhile ventures is the way to go. While some will put their money into starting a business or buying and trading stocks, another viable option is putting your money into real estate. It’s no secret that real estate appreciates over time, especially land. After all, no matter what happens, people will always need a place to live or a place to conduct business. But in the realm of real estate, there are still a lot of options for someone looking to invest. One could try buying “fixer-uppers” and then try flipping them after giving the property a makeover. Others may choose to buy one or several properties which they can then rent out on either a long-term or short-term basis. But another option which even some seasoned investors may not be aware of are using mortgage notes as passive income. So, what are these mortgage notes and where can you even find mortgage notes in New York? Let’s get into that now.

What Are Mortgage Notes?

When someone buys a new property, it’s common for them to take out a loan, and more commonly a mortgage. Most understand a mortgage to be a loan that uses the property to be bought as collateral, but that’s only half of what the loan is. While the mortgage is a document that ties the asset (the property to be bought) to the loan, the note is a promise to repay the loan. It’s essentially a document that formalizes this promise and contains all relevant details like the balance amount, down payment amount, interest rate, and terms.

How Can I Use Mortgage Notes As Passive Income?

The other ways you can earn money by investing in property usually require some work or help from a third party. For example, if you were to buy a condo unit or a house and then rent it out, you would have to take the time to manage and maintain the property, vet possible tenants, and consistently collect rent every month. If you were to outsource management to a third party, you would still have to pay them for their services, which can cut into your profits while still needing some involvement from your end.

When you buy mortgage notes for sale, you’re essentiallly buying the debt of the homeowner and acting like the bank that originally provided the mortgage. The responsibility of maintaining the home still lies with the homeowner so you won’t be paying to fix anything on the property. Instead, you’ll simply be collecting loan payments and interest on a regular basis requiring far less effort on your end.

Benefits Of Investing In Mortgage Notes

Mortgage notes offer high liquidity as recapitalizing and selling can have a quicker turnaround. When you choose the right mortgage notes to buy, you can earn yourself a pretty penny, with it being common for investors to see double-digit returns in the high teens and low twenties. With mortgage notes, you can also enjoy favorable tax treatment since the IRS treats this income as passive and not earned. There’s also a low barrier for entry depending on how you get your mortgage notes, and you can rest assured knowing that your investment is secured. If a borrower defaults, you can take the property.

Another benefit that comes with mortgage notes is the possibility of helping a distressed homeowner. When you buy non-performing mortgage notes, this mean that the borrower has stopped making payments, possibly due to them recently losing their job or coming across a medical emergency. When this happens, you can work with the buyer and renegotiate the term and rates of their loan to something that is more workable in the current situation. This way, you can help them repay their loans while allowing them to stay in their homes.

Invest Through Us!

When looking for mortgage notes for sale, there are several options you can look at including peer-to-peer groups, finding private lenders, or investing in mortgage REITs. Whichever way you choose to go for, you can easily get the help of a real estate solutions company like Melanin Homes to help you secure mortgage notes in New York. Get a jump start in earning passive income and contact us to become a preferred buyer or schedule a free consultation.

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