Using a promisory note I own towards purchase of another house.

Memphis, Tennessee
Tax Liens & Mortgage Notes
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Using a promisory note I own towards purchase of another house.

Kimberly A Renken
Investor · Sacramento Ca · Member since 2022 · 10 posts · 3 votes

Hello.  I own a promisory note in which someone is paying me monthly.  Am I able to "sell" this promisory note to the seller of a home I want to purchase?  I  hope that makes sense.  Thank you!

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Marco Bario
Specialist · Frederick, MD · Member since 2017 · 474 posts · 454 votes
3y

@Kimberly A Renken - 

Yes you can. Teachers like Pete Fortunato, Bill Tan, or Bill Cook teach these types of methods. It's also something you'll see if you attend one of the better exchange meetings. 

You're unable to do a 1031 exchange from paper to property. If the note is giving you the tax benefits of an installment sale, be sure to speak with your tax advisor before you either trade or sell the note. 

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  • Alecia Bolton
    Investor · Seatac, WA · Member since 2017 · 134 posts · 121 votes
    3y

    Sure, you can.  You could sell it to another investor too if you're looking for cash.

    If you do go that route, which is very creative, congrats, I'd definitely have a lawyer write up that it's part of the transaction.  I typical realtor PSA might not be able to cover it.

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  • Kimberly A Renken
    OP
    Investor · Sacramento Ca · Member since 2022 · 10 posts · 3 votes
    3y

    Thank you Alecia!  Do other investors expect to buy at a discount?  What is typical?  Thank you!

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  • Alecia Bolton
    Investor · Seatac, WA · Member since 2017 · 134 posts · 121 votes
    3y

    You're welcome!  

    Typically, yes, but it depends.  Most investors are wanting to get a 12%+ return, and if the note rate is less than that, they'll look for a discount.  Also how it was originated is important and if it's currently being self-serviced or serviced by a 3rd party.  I've paid par for performing notes (par is the unpaid balance), but I've also had notes at a 20% discount.  So it's hard to say without knowing all the details.

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  • Marco Bario
    Specialist · Frederick, MD · Member since 2017 · 474 posts · 454 votes
    3y

    @Kimberly A Renken - 

    Yes you can. Teachers like Pete Fortunato, Bill Tan, or Bill Cook teach these types of methods. It's also something you'll see if you attend one of the better exchange meetings. 

    You're unable to do a 1031 exchange from paper to property. If the note is giving you the tax benefits of an installment sale, be sure to speak with your tax advisor before you either trade or sell the note. 

    3Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Kimberly A Renken:

    Hello.  I own a promisory note in which someone is paying me monthly.  Am I able to "sell" this promisory note to the seller of a home I want to purchase?  I  hope that makes sense.  Thank you!


     As noted you can sell the note in exchange for a home you want to purchase. Make sure its a full sale and if it goes default its not on you and they buy it outright. That is a very interesting concept. If that does not work you could sell partial amount of the loan where they buy say the next 50 payments from you if they do not buy the whole note.

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  • Kimberly A Renken
    OP
    Investor · Sacramento Ca · Member since 2022 · 10 posts · 3 votes
    3y

    Thank you Chris.

    0Reply
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