Mortgage Notes are One of the Best Forms of Passive Income. Here’s Why

by Nov 25, 2021

If you’re here and checking out what we have to say, you probably are at that stage in life where googling the best passive income options is something you’re doing pretty often. First and foremost, congratulations! This just means you want to take control of your finances and see all the ways you can make it grow. Mortgage notes are a great source of passive income, and can be stable enough to generate cash for you monthly. What’s a mortgage note, you ask? Read on as we define it for you and let you know how much potential it really has:

The definition of a mortgage note

You probably already know that it’s difficult for most people in the United States to purchase a home without taking out a loan, right? Mortgage notes are crucial to the process.

There are two documents a buyer needs to sign: a mortgage agreement and a promissory note, which makes them liable to pay back their loan.

What does investing in mortgage notes mean?

When you think of investing, you usually think of stocks, bonds, and cryptocurrency. But investing in mortgage notes is often overlooked, but shouldn’t be underestimated. Purchasing a mortgage note means purchasing the debt of the borrower. None of the real estate is owned by you, and you don’t need to pay any maintenance fees for the property.

What are the advantages of investing in a mortgage note?

Here are some benefits you can incur almost immediately:
  • Steady passive income – If your borrower pays regularly, this can generate income for you monthly.
  • Lower recurring expenses – No need to pay for property fees and real estate agent fees.
  • Opportunity for higher returns – You are also given the power to change the interest rate of the loan to further benefit you.

What are some disadvantages I should consider?

No investments are without risks. Be mindful of the following:
  • Loan defaulting – You can lose money if the borrower is unable to pay their share in 120 days.
  • Property goes to auction – This is risky for you if it sells for less than what you bought the note for.
  • Income prediction is tricky – It’s difficult to estimate given that each borrower is different, and they may not be able to pay as quickly as you’d like.
  • No FDIC insurance – Mortgage notes aren’t secured by a government institution, and are therefore prone to more risk.

What long-term strategy can I turn to for mortgage note investing?

One way to invest long-term is to look at the current housing market and see how you can capitalize on it. The market is in a recession now, probably due to the recent pandemic and other factors. Given that there’s a limited amount of notes available and prices are high, expect the market to turn soon. Buy when there’s a decrease in pricing and increase in inventory.

You can work with your preferred institution to find out when to buy and how long to hold your note for, bearing these crucial factors in mind.

Where can I buy a mortgage note?

Local Bank

Many major banks offer this service to their clients. Remember to ask them about their rates and how much their clients earn on average.

Online Sources

There are guides you can turn to, and institutions you can contact directly, like Melanin Homes.

Note Funds

You can either approach private equity funds or hedge funds in order to purchase mortgage notes. The benefit of this route is that you can pool your resources together with other investors to acquire shares of groups of loans from various Institutions.

Invest through us!

Looking for mortgage notes for sale and the best institution to buy mortgage notes in New York from? Melanin Homes is here to help.

We can provide you with truly passive cash flow and ideal mortgage notes available for you when you contact us via our website. All you have to do is give us your name, phone number, and email address when you fill out our form so you can start your passive income journey with us when you can!

That’s not all! If you’re still undecided, free consultations are available for booking whenever you’re free today.

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