Investor Tips to Investing In Paper Real Estate


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When getting into real estate investing most investors don’t consider the benefits that investing in paper real estate can provide them. Some expert investors consider paper real estate the only way to invest because it is easier and they don’t have to deal with the physical details of a property. Paper real estate involves investing on the administrative side of real estate and these investors act as a lender. They finance wraparound mortgages, second trusts, and purchase mortgages at a discount. These documents are collectively known as notes.

Investors who choose to purchase notes, purchase them at a bit below the value and they are able to earn a high interest return on their money. Now at the same time, every investment comes at a risk. What happens when a borrower doesn’t have the funds to pay the monthly payment on the note? These investors get stuck waiting for the property to foreclose before they are paid off on their investment.

If a buyer and seller are unable to close a deal because the buyer doesn’t have enough money for a down payment an investor can come in and pay a portion of the down payment to the seller. The investor would secure a promissory note from the buyer and collect monthly payments with interest in order to pay for the down payment over time. Since most of the buyers are unable to fully qualify with a typical lender, the interest rates that a paper investor can charge are high and are a great investment with no grunt work required.

Investors can set up these promissory notes any way they want. If an investor wants to add a balloon payment date in order to recoup their investment on a certain date, they can. The beauty of these notes is that an investor can create different financing techniques because they leverage the power by borrowing the money.

These promissory notes add a lien to the property so if there is a problem with payment, the home will eventually go to the foreclosure process. This is a mess and investors don’t want to be involved with this but it is nice to know that their investment is a safe bet either way.

Investing in paper is only possible if an investor has a great deal of expendable cash. It certainly beats the rehab and flip philosophy because there is less work and greater returns. Invest in paper and take the role of the bank.

Asking questions with these few tips in mind will help save real estate investors thousands. For more ideas related to real estate investing, call or visit us a Homevestorsfranchise.com. We are the nation’s number one home buying franchise with over 15 years of experience. Our company has a vast assortment of real estate investment and real estate franchise opportunities available to help you grow your real estate business. Come see us for more information.

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