Today, we’re going to talk about a nagging concern for many real estate investors—liquidity.
It’s one of those notable downsides of owning property. Of course, finding buyers in a seller’s market wouldn’t be much of an issue. Even then, there’s significant paperwork and not to mention regulations and procedures you’ll need to follow. So, even after finding a buyer, the closing process could take around 30-45 days on average or more.
According to Zillow, it takes an average of 55-75 days in total to sell a house. This makes real estate one of the least liquid assets to own. In other words, your property could carry substantial equity, but converting it to cash will not be easy.
Now let’s compare this with mortgage note investing. Notes have an active secondary market, where you can easily sell them if you wish to exit before they mature. This makes notes more of a liquid asset as the approximate time to sell a note is 21 days.
It doesn’t stop there. With mortgage notes, you can adopt many other exit strategies depending on the circumstance and your investment goals. For instance, if the loan were to go into default, you can modify or restructure the debt so the borrower can meet repayments. At the end of the day, all these options are there to safeguard investor interests.
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