Exit Strategies for a Real Estate Notes
One of the things I like most about real estate notes is that there are so many ways to pake a passive income with them. Like most real estate investors, I have bought properties. There are a few ways you can earn a yield on your investment with real estate. Of course, you can rent the property on a long term lease or on a short term basis (e.g. AirBNB, etc.) You can also sell the property to another person or company. However, those are the main ways you can exit a real estate home or even a commercial property. There are multiple ways that you can “exit” a real estate note. Below are 10 ways. Some of these are probably known to you and perhaps there are some ways that you have not considered. They are found below and are as follows:
1. BORROWER PAYS FULL TERM-
Borrower pays as agreed for the life of the loan (e.g. 10 years, 15 years, etc.)
Average home mortgage ends after about 7-8 years due to home sale, move, refi, etc.
2. NOTE PAYS OFF EARLY
Borrower pays off the loan early due to refi, moving, etc.
3. SELL THE FULL NOTE
As the lender and/or the bank, you sell the promissory note to a individual, company, IRA, etc.
4. SELL A PARTIAL NOTE
Note holder sells a stream of payments on the real estate note to recover some of their capital (e.g. 5 years, 10 years, etc.); can sell partial note based on the money the note holder needs or monies the partial note seller has
5. COMBINE WITH OTHER NOTES FOR A MINI POOL/ PORTFOLI0
Anotherwords, instead of selling one real estate note you sell a pool of real estate notes like persons that would sell a portfolio of rental properties
6. HELP BORROWER RE-FINANCE SO THEY PAY OFF THE NOTE EARLY
Encourage the borrower to pay off the note early so you can get your monies more quickly
7. RE-STRUCTURE THE NOTE FOR AN EARLY PAY OFF
Re-structure the real estate note so it pays off early (e.g. shorter term, lower interest rates, etc.)
8. INCENTIVIZE FOR AN EARLY PAY OFF- OFFER THEM A DISCOUNT IF THEY PAY OFF EARLY
As the lender, make it financially advantageous for the borrower to pay off early
9. TRADE THE NOTE- FOR CAR, AIRBNB TIME, ETC.
Trade the real estate note for something else of value
10. HYPOTHECATE THE NOTE- USE THE NOTE FOR COLLATERAL TO BORROW $$ FROM BANK, COMPANY, ETC.
Best wishes in your investments.- R.L. Wall