How to Buy Homeowner Mortgages with Someone Else's Money!!
Mortgage notes are a great way to invest in property and make an even higher return that with other types of property investment. Plus, there is a way you can buy a homeowner mortgage using someone else's money.
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How to Find the Money When you are working as a property investor with a mortgage owner to buy their mortgage from them, you'll have the owner sign a "Note Purchase Agreement" to lock them into selling you the mortgage to a property for a certain amount of money.
In this note purchase agreement, make sure that you include a certain period of time for due diligence. This is to allow you to get your trait report and head down to the court house to check for any other liens on the property. Make sure that your due diligence period is between 45-60 days to give you plenty of time.
While you are carrying out due diligence, you will also be looking for another real estate investor to give you cash to buy that mortgage note. There are plenty of places to find investors, one mortgage investor in particular goes to her local real estate investing club. Here she gets a chance to present potential mortgage note purchase deals and get investors.
So, you attend your local club and meet a real estate investor who is looking for a 14% percent return on her investment.
Quick Tip: The investment and the return are inversely proportional. The less money you invest, the more money you make on your return.
How it Works Out Say, you are buying someone's $87,000 mortgage note for $70,000, that means you've just earned $17,000 profit in the long run. That's about a 24% return on your investment. All you need to do to continue making money without spending your own is find another real estate investor who is looking to invest their money and get a slightly lower rate of return.
At the real estate club, you meet just such an investor. She only wants a 14% return on her money investment for the property mortgage.
So, you buy the mortgage note from the owner at $70,000, then turn around and sell it to the investor for $74,820. That leaves about $4,000 in profits for you to pocket from your involvement in the deal. The investor is going to make a profit too, because her mortgage note is worth $87,000 even though she only paid about $74,000.
By looking for your own investor for your mortgage note purchase you can still make money on the differences in percentage. You've got to pay careful attention to the percent of return for yourself, the mortgage owner and your investor, but you can make money by setting up the sale!
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