Should I Sell My Performing Note Now or Keep the Cash Flow?
Member since 2026 · 35 posts · 12 votes
Should I Sell My Performing Note Now or Keep the Cash Flow?
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Lender · Chicago, IL · Member since 2025 · 204 posts · 101 votes
7moWhen 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.
3 Replies
- Lender · Chicago, IL · Member since 2025 · 204 posts · 101 votes7moWhen 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.
- Member since 2023 · 4 posts · 3 votes7mo
What is your long term plan? If your plan to purchase notes use the P&I and accretion (if you bought at a discount) for mail box money, don't sell the note.
I buy many new loans at a lower price, say 80% of the UPB, and my overall plan is to continue to buy as many as possible for long term income. That is my "plan". In saying that, after I've held a note for 2-3 years, it becomes much more valuable due to seasoning and lowering of the LTV. I have private wealthy individuals that I've made relationships with who will then want that note, and I charge them 95%. So I e received 2-3 years of payments, plus a 15% "gain on sale"
If you're new to note investing, it's important to have a plan, rather than just buying a loan and hoping for the best.
Good luck!
Brian
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes7mo
Answer to this question is always: "it depends".
1. What is your financial situation, do you need cash flow or can you go for growth?
2. Do you have access to higher yielding investments?
3. Do you have time to manage a performing note?
Each persons situation is different
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