Mortgage notes can be a good way to invest in New York real estate… but only if you purchase the right ones. While it may seem that way, not all mortgage notes are the same, so it’s important you choose a good one so you can get a ROI.
Now, how exactly do you invest in mortgage notes the right way? We’re here to give you our top tips in finding the best mortgage notes out there!
What is a Mortgage Note?
Mortgage notes go by many different names including real estate lien notes, borrower’s notes, and promissory notes. While a relatively lesser-known investment vehicle, it can provide the owner with passive income and is considered to be an asset. In fact, mortgage notes can provide investors with return rates that are higher than a bank’s low-yield bonds and higher returns than most stock dividends.
In a nutshell, a mortgage note is a legal document that stipulate all the terms of a mortgage loan. It is not a mortgage itself. Rather, it is what the borrower is expected to do and fulfill in return for the loaned amount. If a borrower defaults on their payments, a mortgage note gives the lender the right to possess the property in question.
When a person buys a property (whether that’s a commercial property or private residence), the buyer puts their name on the title. This gives them the legal responsibility to maintain the property, purchase insurance, and pay for real estate taxes.
A lender, however, has a stake in the property but does not carry the abovementioned responsibilities. Should the property need any repair, like a leaking roof or structural damage, it is up to the buyer to shoulder the corresponding expenses. What a lender simply does is provide the buyer (who, in this case, is also a borrower) with the money to pay off their home.
When an investor purchases a mortgage note, they take over the responsibility of paying for the loan. IN a way, you are purchasing the debt or loan that is connected to the property. The borrower now has to pay off your debt in the form of monthly payments. This is why ortgage notes can provide investors with passive income in the form of interest and principle.
How to Buy Mortgage Notes in NY
When buying mortgage notes in NY, you need to follow certain steps.
- Establish your objective
Before purchasing a mortgage note, you need to figure out why you want one. Do you want one simply to hold on to it (and receive passive income from the borrower) or because you plan on foreclosing on the property, flipping it, and then reselling it? If you want the former, you need to buy what is called a performing mortgage note. If the latter is more appealing to you, a non-performing mortgage note is just for you.
2. Find a seller
There are various places you can get mortgage notes in NY, including banks, private mortgage notes sellers, and companies that specialize in selling mortgage notes. Shop around and compare rates to find the one that suits your budget. Keep in mind that private note sellers do not go through any regulations, so be wary of this option.
3. Go through the “tape”
A mortgage note “tape” is a datasheet that contains all of the information needed to help evaluate how much the mortgage note is valued. This is one of the first things you need to review before deciding on a mortgage note.We hope this has helped you decide on the best mortgage note for your needs!
INVEST THROUGH US!
Get started on your mortgage note investment journey! If you’re looking for profitable mortgage notes for sale, come to Melanin Homes. We have various mortgage notes in New York you can choose from. If you also have any questions about mortgage note investing, you can also talk to us. We offer free consultation services to help you learn more about mortgage note investing and how to make the most out of it. Visit our website or contact us today to learn more about our services.
