Whether you’re a new investor or an experienced noteholder, there are many strategies you can adopt when investing in mortgage notes. One such approach involves mortgage note partials.
So, let’s take a closer look at what partials are and why you might want to consider them.
In a note investment, you would usually take over the entire distressed debt from the lender. However, sometimes, it could be available for a limited repayment period, after which the original noteholder will repurchase it from the buyer. These are called partial notes.
Partials typically come with lower capital requirements and may reduce the investor’s risk exposure. As a result, they have become popular among new investors and those with a lower risk appetite.
Once you gain more experience in mortgage note investing, you could even consider selling partials to free up cash flow and purchase more notes.
For example, you could sell your mortgage note to a partial buyer for five years and invest what you receive in another high-potential note. After the agreed five-year period, you get to repurchase what you sold and enjoy returns from not one but two-note investments.
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