3 Things To Watch Out For When Buying Real Estate Notes

There are three main things to watch out for when buying real estate notes. Real estate investing is about being purposeful and having a defied strategy. This is difficult to do unless you have all the details laid out so be extra careful and watch out for note purchases where: 3 Things To Watch Out For When Buying Real Estate Notes

  1. Do you know you will be able to make money going in: Do you have to purchase bulk with no knowledge of the locations, equity position and balances of each of the notes? There indeed can be a number of ways to make profits and big profits from these notes and of course the opposite is also true. This type of speculation can make you rich and can also do the reverse. Lots of work and diligence needs to be put into strategizing profit returns off of each different note. Each note may have a vastly different technique that needs to be executed in order to make money from it, but profits come from a duplicable system and systems are hard to duplicate when each note has a different game plan to execute.
  2. Does the property attached to the note have a second note that you do jot control: Many notes that are sold are attached to properties that have a second or even third mortgage on them. (ouch) Your strategy is instantly turned upside down when this happens. Now you need to be a master at negotiating. You need to find a win win when a homeowner has financial difficulties. In order for you to profit from venture you need to create a new loan or payment plan for the home owner and the second note holder may have entirely different motivations than you do. Even if you went on the foreclosure route, you still need to negotiate some type of payment to the second note holder. This can become very time consuming. Again, the bigger the risk, the bigger the rewards but make sure you are up to the challenges first.
  3. Bidding on notes that have properties in distant locations. The bidding process can be a challenge so create your bidding criteria and stick to it. Be aware that when bidding on boxes of notes, the properties may be located in distant locations. We are a global community now and most things can be done by fax phone and fed ex. However negotiating on a note in area that is states away, you want to consider, are you aware of all the codes and laws that govern the notes and or foreclosure process should that become your strategy. Also consider the possibility of language differences that you may need to work within.

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