Buying and selling mortgage notes is all about receiving those monthly payments.
Keeping accurate records will show how much the buyer still owes along with their payment habits. Plus, it improves the value of the note to investors.
Here’s a look at two ways to tackle payment histories.
Let a Pro Handle It!
Having the buyer mail monthly payments to a third party professional is the easiest option. This outside servicing agent keeps track of the balance and sends the money along to the seller. They also issue the annual 1098 Mortgage Interest Statements and can hold original documents (like the Note, Trust Deed, or Mortage) in safe keeping.
The DIY Method
Some sellers use the “Do It Yourself”’ method having the buyer mail payments directly to them. If sellers don’t use a third party for servicing they will need to follow these steps.
- Place original note and other original documents in a safe deposit box.
- Make a copy of each check or money ordered received (accepting cash does not leave a paper trail for note buyers to to verify).
- Keep a copy of the bank deposit slip or monthly statement reflecting the single payment deposit
- Create a ledger reflecting the date and amount of payments received
- Calculate the amount applied to interest, principal, late fees (if any), and the resulting principal balance. An amortization schedule or calculator can be helpful. Once calculated, record in the ledger.
- Send out an annual statement to the buyer or payer along with the IRS1098 Mortgage Interest Statement.
- Verify the real estate taxes and property insurance are being kept current. Consider establishing a tax and insurance escrow wherein the buyer pays 1/12th of the annual amount into a reserve account each month.
- Send collection letters as necessary for late payments.
Making Note Buyers Happy
When a note investor agrees to buy mortgage notes they will request a payment history. A verifiable payment history can improve the value of a note as it provides proof of timely payments. A payment history is considered verified when it is either provided by a third party or is backed up by the documents and records outlined.
Unfortunately many sellers fail to keep track of the payments received. When they go to sell the real estate note they try to recreate the history from memory. Without any proof of payments received, an investor has to go on faith. Sometimes a payment history affidavit can substitute for a payment record but it still doesn’t add the value of a verifiable proof.
Note brokers can help sellers protect the value of their cash flow note by setting up a verifiable payment tracking method today!
Hi Tracey. I purchases Charter Financial business note business. Register my dba business with the courts as an Independent contractor. Named. NTJ Investments. On February 18, 2011. I really didn’t do anything far as advertisement. Im ready to start this business this year. I need help advertising marketing online.
Welcome to the cash flow business. We are big fans of online marketing! Here is an article to get you started: https://noteinvestor.com/note-brokers/7-tips-marketing-note-business-online/
Hi , i want to get into the mortgage note business. i have 20+ years in the mortgage , real estate and construction business. What would you suggest for education resources. i hav 8-10 investors. Thanks, Larry!!!!
Hello Larry!
Your background will serve you well in the cash flow note business. While real estate knowledge isn’t mandatory, it certainly shortens the learning curve!
For educational resources we suggest the following:
1) Finding Cash Flow Notes – How to find notes and earn fees as a note broker. The marketing techniques also work well for note buyers and investors.
2) Personal Profit Series: Notes – The Complete Money Making System to Buying, Referring, Creating and Holding Real Estate Notes! Includes essential documents, investment analysis, and closing systems for note buyers or note brokers that want to start investing. This manual is now included in the Finding Cash Flow Notes Training.
3) The Paper Source Journal – Industry newsletter for the note business.
4) Note Servicing Center – Provides servicing and information for collecting payments on seller financed and private mortgage notes.
In the way of full disclosure, the first two items are top quality yet affordable trainings offered here on our site. They are backed by the 40+ years of combined experience that Fred and I share.
You are of course welcome to check out other trainings. I just suggest you make sure the trainers are truly active in the business. Plus, avoid any of the high priced “up-sells”. In today’s market you really don’t need to spend more that $500 to gain knowledge of our business (for example our training is only $297). 🙂
Feel free to contact us with any questions and thanks for visiting Note Investor!
Tracy
THANKS FOR YOUR RESPONSE. HOW MUCH ARE THE MATERIALS YOU MENTIONED. WORKING THE SYSTEM . REALISTIC HOW LONG WOULD IT TAKE TO MAKE SIX FIGURES. THANKS, LARRY!!!!
Hello Larry,
The Finding Cash Flow Notes Training runs $197. The amount of income and the length of time varies by person and depends upon the skills, time, and marketing efforts of each individual. One way to achieve your income goals is to calculate the number of deals you must close. If an average fee runs 3-6% of the amount invested and the average transaction is $50,000 then the typical note broker fee would range between $1,500 to $3,000. That would take 34-67 closings per year to reach an annual income of $100,000 (or 3-6 deals per month). If you average a higher fee or target larger transactions then the number of closings per month can be less. It all starts with effective marketing targeted to qualified leads. For more details we invite you to watch our free videos on Finding Cash Flow Notes which will help you decide if the cash flow business and the training course is right for you.