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Buying Discounted Real Estate Notes Can Be A Great Financial Strategy |
When given the choice of whether they would rather have a lot of money right now or a little less money in a years time, most people will tell you that they will take their money right now, thank you very much. The value of a dollar in your hand is greater to most people than the value of a potential dollar later, and that makes a dollar in the present worth more than a future dollar, which is the principle behind the discounting of real estate notes for sale.
A special formula is used by real estate note investors to determine the amount that should be paid for a note at any given time based on the time value of money. Dollars tomorrow are not worth as much to us as dollars today, remember. This discount means that you are not paying the full value of a note (which would include the interest charged on the account) but would instead be paying a lower rate based on the determined value of that money in the future and factoring in the time that it will take you to get your money.
If you choose to buy and sell these discounted notes, you can earn a great deal of money. One way to do that is to purchase the real estate notes directly from the originator of the loan, especially if the loan was originally a seller financed mortgage, and by doing so at a deep discount. Private sellers are less likely to know the true value of the note, and more likely to be highly motivated to sell their note quickly. If you can get them to accept a lesser amount for the note, then you can you can make a great return quickly by turning around and selling the note to another investor.
This is the way in which most people decide to make their money when it comes to investing real estate notes, and that means that the competition to buy these notes is very high. A very good deal is a true boon to a buyer like you who is trying to build their real estate note investment portfolio. The competition makes it very difficult to find great deals in the market.
You can try to use the internet to your benefit in the search for private sellers, however the competition is doing the same thing, and online competition is very fierce. Instead, try advertising locally in the hopes of tapping a personal market that has not been drained already, and you will be able to build your real estate note investment business note by note over time. Your patience will pay off if you have the start up capital to get your business off of the ground and the intelligence to plan for every contingency. A lot of money is on the line, so always have a backup plan to fall back on.
If you would rather have a regular income from your real estate note investments than buy and sell real estate notes frequently, you can buy a discounted note and hold onto it in order to collect on the monthly payments being made against the note. By doing this, you are creating what is known as real estate cash flow, which is another great way to build up your income if you can afford to sit on your investment for an extended period of time.
If you want to build up successful cash flow, you will have to have a large amount of money that you can afford to invest for a long period of time, however this kind of investment can really pay off in the long run. The returns from a real estate cash flow are much higher than the returns on CDs and government bonds, and you get to take your payouts monthly instead of waiting for your account to mature. No matter how you choose to move forward, real estate investing in discount real estate notes is a potentially lucrative venture that you should not miss.
About the Author
Joshua Geary is avid writer and speaker and principal of My Real Estate IRA, helps those nearing retirement age learn how to invest in real estate notes with their IRA funds. Visit his website for the latest real estate IRA strategies.
Article source http://w4rum.com/2741.t
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| [By Kimber Fulcher] [07/Jul/07] |
