The
Real Estate Note Industry?
The
private real estate note business has been around informally for many
years….as long as there have been mortgages.
The industry has developed and matured tremendously over the
years, and with the onset of technology such as the internet, it
has changed and adapted to a very new environment. Today, private mortgages are considered a viable alternative
to “institutional” mortgages for many North Americans, and a
secondary trading market for this secured paper is developing.
It is estimated that there are over $90 Billion in existing
seller financed Real Estate Notes and Trust Deeds in the United
States, secured on over 1.8 million properties. As well, the market grows each year by a further $2.8
Billion. Clearly, the use
of seller financing when selling/buying properties is common and
growing. This growth has
facilitated the liquidity required to trade the notes once created
through an evolving and expanding part of the US economy…The
Discounted Cash Flow Business.
Sophisticated investors value the security and potential
returns from investing in Real Estate Notes.
Many prefer owning real estate paper to actual real estate
because of the headaches that surround renting property, maintenance
and upkeep etc. Returns
on investments in bonds and the stock market have been variable at
best over the last few years, and many have lost confidence in the
market’s ability to filter through the fraudulent and greedy actions
of some of the country’s most powerful corporate leaders.
Sophisticated investors are looking for better choices and Real
Estate Notes is the answer for more and more people each year.
Individual investors are learning what financial institutions
and insurance companies have known for years…that secured real
estate paper can be a safe and secure alternative investment.
The industry is often referred to as the “discounted cash
flow business” because the investor will only pay a portion of the
balance due on the note at any given time.
The discount plus the interest collected provides the return to
the investor, while the upfront cash removes the risk from the seller
of an uncertain payment stream collected over several years.