Real Estate Note Buying FAQs.
Let’s say you had a $40,000 real estate note with 80 months of payments remaining that you wanted to make money with, and we quoted the cash value of it at $35,000. If you were to invest this lump sum of $35,000 at 11.75% (stock market average) for 80 months (the remainder of your term) the cash value will increase to over $77,000.
Or you can keep receiving your existing payments. Of course, most people simply fritter these small payments away, while a lump sum of cash is a powerful investment tool.
You don’t have your balance in hand. What you have is a promise of payment over the remaining term. The buyer could pay this real estate note off anytime. If our investor purchases your note for sale and the buyer pays off next month, we would only get the balance owing, then they would lose money in this situation. We also consider the risk involved, as the buyer could default at anytime and then our investor would get no future interest. We pay you a lump sum for your cash flow note. And cash in hand is worth more than future money.
In order to provide you with the best bid possible, NoteWorld must perform an appraisal, a title search, and must receive all documents. We fund very quickly after the completion of those processes, and we pay all the processing and closing costs.
At NoteWorld, we pledge to do all that we can to meet or beat any valid written bid. We don’t use a straight percent or dollar amount of discount in purchasing real estate notes. The discount amount varies, depending on many factors involving your note, including the interest rate, the length of the remaining term, the type of property and the buyer’s ability to repay the note.
When we value a real estate note, we are looking at the future value of the payment stream and the likelihood that the payment stream will continue. The property value is really only collateral against the note. But the property value is definitely a factor that we use to determine the likelihood that the buyer will continue to pay.
Our investors do not want to purchase a real estate note and foreclose on it. There is too much cost and risk associated with the foreclosure process and it is not our preferred way of doing business.
You must also consider the risk level associated with carrying a real estate note. Your money is guaranteed at a bank. With your note, if the buyer stops paying, you will receive no interest.
Also your cash flow note is paying off with each monthly payment. Once the balance is $0.00, you will receive no interest. If you were to sell the note, you could use the cash flow to invest and then reinvest the interest so that there is money for you in the future.
None. We pay for all fees and we do all the work of transferring the note, the title search, and other related tasks. The amount we quoted you is the amount you’ll get.
Think about how many loaves of bread you can buy with $10 today. Now imagine how much less bread that same $10 will buy you ten years from now. The fact is, money loses value over time. So, if you’re getting paid $400 a month for 20 years, the $400 payment you get today is worth more than the $400 you’ll get at the end of your contract.
Here’s another way to look at it: Let’s say you have a 20-year cash flow note valued at $50,000.Every month that note is paid off, the note becomes less valuable. When it is finally paid off in 20 years, it will zero out and be worth nothing. But, if you were to take that $50,000 now and invest it in the stock market, an average of 12% annual return will increase the investment to over $450,000, after 20 years.
Just keep in mind that immediate cash is more valuable than future money. And immediate cash is what you’ll get from us.
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