Performing residential notes used to be mailbox money.

Tax Liens & Mortgage Notes
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Performing residential notes used to be mailbox money.

Frances Cammack
Member since 2026 · 35 posts · 12 votes

Key shift: 50bps → 75-100bps. A $150K note loses 25% yield to servicing.

Why buyers bailed:

  • Sub-$250K notes don't pencil
  • Compliance + RESPA headaches
  • DSCR rentals yield 12%+
  • Tax treatment kills reinvestment

Active buyers pivoting:

  • Partial participation (lower costs)
  • Servicing-included deals
  • Commercial paper (higher coupons)

Market data: Buyer pools down 60%. Discounts now 15-20% off par.

Recent deal: $285K note – seller wanted 94%, bid 82%. No trade.

Your take: Minimum note size now? Servicing kill your last deal?

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
8mo
Quote from @Ken M.:
Quote from @Chris Seveney:

@Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 

Okay, for those of us who have no idea what language you are speaking, highfalutin investing talk I suppose,
what would a normal 7% note, current (no lates), sell for at discount? Asking for a friend :-)



Most of the notes in this instance are seller financed with inflated appraisals and borrowers who have had defaults in the past, so those will sell for 20% discount. If it was institutionally written it would sell in the 90's. I think people are leaving a lot of $ on the table by not professionally underwriting with doing common sense things like an appraisal, a full underwriting file of credit etc. from the borrower. 

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    8mo

    Tend to disagree - not sure how a $150k note would lose 25% if your yield. Assuming it's 6% that's a $900 payment and pay $25/month that's less than 3% of the payment. 
    whrn bidding people need to account for this - recently saw a pool of 0% loans with super low payments and those I agree servicing would  crushing those numbers 

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      8mo
      Quote from @Chris Seveney:

      Tend to disagree - not sure how a $150k note would lose 25% if your yield. Assuming it's 6% that's a $900 payment and pay $25/month that's less than 3% of the payment. 
      whrn bidding people need to account for this - recently saw a pool of 0% loans with super low payments and those I agree servicing would  crushing those numbers 


       On the 0% does the note buyer also have to pay inputed income tax ? 

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    • Chris SeveneyBusiness Member
      Moderator
      Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
      8mo

      @Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      8mo
      Quote from @Chris Seveney:

      @Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 


      well that would further devalue the note. 
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    • Ken M.
      Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
      8mo
      Quote from @Chris Seveney:

      @Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 

      Okay, for those of us who have no idea what language you are speaking, highfalutin investing talk I suppose,
      what would a normal 7% note, current (no lates), sell for at discount? Asking for a friend :-)


      0Reply
    • Chris SeveneyBusiness Member
      Moderator
      Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
      8mo
      Quote from @Ken M.:
      Quote from @Chris Seveney:

      @Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 

      Okay, for those of us who have no idea what language you are speaking, highfalutin investing talk I suppose,
      what would a normal 7% note, current (no lates), sell for at discount? Asking for a friend :-)



      Most of the notes in this instance are seller financed with inflated appraisals and borrowers who have had defaults in the past, so those will sell for 20% discount. If it was institutionally written it would sell in the 90's. I think people are leaving a lot of $ on the table by not professionally underwriting with doing common sense things like an appraisal, a full underwriting file of credit etc. from the borrower. 

      7e investments53 Reviews
      WebsiteView Page
      3Reply
    • Ken M.
      Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
      8mo
      Quote from @Chris Seveney:
      Quote from @Ken M.:
      Quote from @Chris Seveney:

      @Jay Hinrichs - I believe they do. I haven't bought 0% loans but I don't see why they wouldn't 

      Okay, for those of us who have no idea what language you are speaking, highfalutin investing talk I suppose,
      what would a normal 7% note, current (no lates), sell for at discount? Asking for a friend :-)



      Most of the notes in this instance are seller financed with inflated appraisals and borrowers who have had defaults in the past, so those will sell for 20% discount. If it was institutionally written it would sell in the 90's. I think people are leaving a lot of $ on the table by not professionally underwriting with doing common sense things like an appraisal, a full underwriting file of credit etc. from the borrower. 

      @Chris Seveney: Thanks. I just doubled my knowledge on notes. :-)

      1Reply
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