How Do I Find Notes to Purchase?
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Real estate notes (also called mortgage notes or promissory notes) to purchase can be a profitable investment strategy, but it requires knowing where to look and how to evaluate the opportunities. Here are some resources and methods to help you find real estate notes to purchase:
- Note Brokers and Dealers
• Note brokers specialize in connecting buyers with sellers of real estate notes. They often have access to a wide range of notes and can help you find deals based on your investment criteria.
o National Note Group (nationalnote.com)
o Note Investors (noteinvestors.com) - Online Marketplaces
• These platforms offer listings of real estate notes for sale. Some of the major ones are:
o Paperstac (paperstac.com): A marketplace for buying and selling performing and non-performing notes.
o NoteTrader (notetrader.com): A platform that allows note buyers and sellers to connect.
o Funder’s Club (fundersclub.com): Although primarily for crowdfunding, they do have note investing options available. - Real Estate Auctions and Distressed Sales
• Mortgage notes are often sold at foreclosure auctions or via real estate auctions, especially if the borrower defaults.
o RealtyTrac (realtytrac.com): Provides access to foreclosure listings and auction sales.
o Auction.com (auction.com): A platform that hosts foreclosure auctions and real estate note sales.
o County Auctions: Many county tax lien or foreclosure auctions provide opportunities to buy mortgage notes. Research local county websites for auction details. - Direct Mail Marketing
• You can send direct mail to property owners whose loans may be in default or who might want to sell their notes. You can target homeowners in pre-foreclosure or those with non-performing loans.
o Consider using tools like ListSource (listsource.com) to build targeted mailing lists of property owners. - Real Estate Investment Groups and Forums
• Networking with other real estate investors can provide access to opportunities for buying and selling real estate notes.
o BiggerPockets (biggerpockets.com): A community of real estate investors with active forums where you can find or inquire about mortgage notes.
o Note Investor Forum: A niche forum where note investors discuss deals and share opportunities. - Banks, Lenders, and Private Sellers
• Some banks and lenders sell their non-performing or distressed notes to reduce their exposure to default risk. This can include community banks, credit unions, and private lenders.
o Contact local banks or lenders to inquire about purchasing non-performing notes.
o Distressed note sellers: Some private investors or smaller lenders sell their notes directly through online platforms, forums, or brokers. - Note Purchase Companies and Real Estate Investment Trusts (REITs)
• Some companies and REITs specialize in purchasing and selling real estate notes. Reaching out to them may provide opportunities to buy notes.
o Invesco Mortgage Capital (invesco.com): A mortgage REIT that often deals in mortgage-backed securities and real estate notes.
o Sprout Mortgage (sproutmortgage.com): Specializes in the sale of performing and non-performing mortgage notes. - Private Auctions & Networking Events
• There are also private note auctions and events where investors can buy notes directly from banks, servicers, and other note holders.
o Look for industry-specific conferences and auctions such as IMN’s Distressed Real Estate Investment Forum or other similar note-focused events. - Legal Notices & Public Records
• Keep an eye on public records and legal notices in local newspapers, especially those related to foreclosure proceedings. You can sometimes contact the mortgage holder to purchase the note before foreclosure.
o Local county records or Notice of Default (NOD) filings are excellent sources to track down distressed notes. - Consult with an Attorney or Title Company
• Sometimes working with an attorney or title company that specializes in real estate can help you find opportunities. They might have insights into defaulted loans or be able to point you in the right direction.
Key Things to Remember When Buying Notes:
• Due Diligence: Always conduct thorough research into the note, including the terms of the loan, payment history, collateral property, and borrower’s situation. A defaulted note may involve significant risks.
• Types of Notes:
o Performing notes: The borrower is making regular payments.
o Non-performing notes: The borrower has stopped making payments and the note may be in or near foreclosure.
o Discounted notes: Some sellers offer notes at a discount to face value, which could represent an opportunity to acquire notes below market value.
Real estate note investing can be highly profitable, but it’s essential to approach it with a solid understanding of the risks involved, especially in the case of distressed or non-performing notes.