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12 Myths of Real Estate Note Investing

Whether you’re a new investor or have been in the game for a while, you might be uncertain of real estate note investing because of what you have heard. Here are facts to dispel just some of the many myths surrounding this niche of real estate investing.

Myth #1: “You need a lot of money.”
Fact: You can buy seller-created real estate notes for a few thousand dollars. Or you can broker notes to institutional investment firms without using any of your own money and make enough to buy a note every so often. Many successful note investors started that way.

Myth #2: “The process is complicated and hard to understand.”
Fact: Buying a note is a lot less complicated than buying a house. You don’t need to deal with real estate agents, title companies, lawyers, appraisers, home inspectors, etc. It can be as simple as performing the due diligence and having the seller sign the note over to you. And there are no closing costs!

Myth #3: “High yields are usury.”
Fact: Note investors can make double- and triple-digit yields, but it is not usury. When a note is sold, the interest rate and the payments do not change. The investor’s yield comes from the discounted price paid for the note. For example, an investor finds a $10,000 note with an interest rate of 10 percent and payments of $132.15 per month. If the investor pays $10,000 for the note, his or her yield would be 10 percent, but if they pay $8,000, their yield is higher (15.63 percent). The note payor’s interest rate and payment amount never change. And there are no closing costs!

CONTINUE READING: https://thinkrealty.com/note-investing-myths/

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