Should I Sell My Performing Note Now or Keep the Cash Flow?

[Frances Cammack]

Hey BP community,

I’m looking for some perspective from other investors who’ve bought or sold performing residential notes.

For those of you who’ve sold a performing 1st position note in the past:

• What made you decide to sell instead of hold?
• Did you use the lump sum for debt paydown, new deals, or just to de-risk?
• What kind of discounts or pricing are you actually seeing in today’s market?
• Anything you wish you had negotiated differently (seasoning, pay history, docs, DTI, etc.)?

On the flip side, for buyers:

• What makes a performing note a “no brainer” buy for you right now?
• What red flags cause you to pass, even if the numbers look good?

I’m actively talking with owners who have 1st position, 1+ year seasoned, performing residential notes and are curious what a fair exit might look like. Would love to hear real-world experiences from folks who’ve been on either side of these trades.

Looking forward to learning from you all.

[Ebonie Beaco]

When I look at it from a seller’s perspective and being a mortgage professional, most investors I’ve seen sell a performing first position note for a few common reasons. Sometimes it’s about redeploying the capital into a higher-yield opportunity. Other times it’s about reducing risk while the payment history is clean and buyer demand is strong. Some investors need liquidity for a new deal or to pay down other debt. In certain cases, if the note rate is lower than what buyers are currently seeking for yield, it can make sense to exit and reposition that capital elsewhere. If the note has 12 or more months of seasoning, a consistent payment history, and solid equity, that is typically when you’ll see stronger pricing. Buyers place a lot of weight on reliability and clean documentation. A complete collateral file and verified pay history can significantly impact how confidently a buyer prices the asset. Pricing is heavily influenced by true LTV rather than optimistic valuations. Buyers look closely at the borrower’s profile and DTI, the state where the property is located, the remaining term on the note, and how the interest rate compares to current yield expectations. Discounts tend to widen quickly when there is limited seasoning, incomplete documentation, or marginal equity. From a buyer’s standpoint, a performing note becomes an easy decision when the risk profile is clearly defined and conservative. That usually means a genuine 60% to 70% LTV or better, at least 12 to 24 months of clean payment history, solid servicing in place, a stable collateral market, and a clean chain of assignments. On the other hand, incomplete files, inflated property values, upcoming balloon maturities, borrower hardship indicators, or challenging foreclosure states can cause buyers to hesitate, even if the surface numbers appear attractive. Ultimately, the decision to sell often comes down to one key question: does this note still align with your portfolio goals, or are you primarily looking for liquidity? Those are two very different motivations. Comparing the projected yield if you hold the note to maturity against the realistic return you could generate by reinvesting the capital.