Mortgage Note Investing: How Do You Decide When to Hold, Sell, or Buy More?

Question

For those involved in mortgage note investing, how do you determine when it's better to hold a note for its ongoing income versus selling it and reallocating the capital?

I imagine the answer can vary depending on the note's performance, the investor's financial goals, and the opportunities available in the market.

A few things I'm curious about:

• Cash flow vs. liquidity: How do you evaluate the benefit of continued monthly payments compared with receiving a lump sum from a potential sale?
• Portfolio strategy: Do you prefer holding a smaller number of notes for the long term, or do you regularly buy and sell notes to manage your portfolio?
• Performing vs. non-performing notes: Does your decision-making process change significantly depending on the borrower's payment history?
• Market conditions: How do interest rates and property values influence your decision to purchase or sell a note?
• Exit strategy: Do you establish an exit plan before purchasing a note, or do you reassess your strategy as circumstances change?

Cash flow vs. liquidity: How do you evaluate the benefit of continued monthly payments compared with receiving a lump sum from a potential sale?

Portfolio strategy: Do you prefer holding a smaller number of notes for the long term, or do you regularly buy and sell notes to manage your portfolio?

Performing vs. non-performing notes: Does your decision-making process change significantly depending on the borrower's payment history?

Market conditions: How do interest rates and property values influence your decision to purchase or sell a note?

Exit strategy: Do you establish an exit plan before purchasing a note, or do you reassess your strategy as circumstances change?

For experienced investors, what specific factors have helped you decide that selling a note was a better move than continuing to hold it?

I'd love to hear real-world experiences, lessons learned, and perspectives from both new and experienced note investors.

Divin Kanyama · Answer

@Mark Adams El I’d compare the note’s current risk-adjusted yield with the net proceeds from selling and the realistic return available on the next opportunity. A seasoned performing note with strong equity, reliable payments, and attractive terms may be worth holding, especially if replacing that income would be difficult. Selling can make more sense when the yield has compressed, borrower or collateral risk has increased, the portfolio is too concentrated, or the capital has a clearly better use. Non-performing notes require a different analysis because workout costs, timelines, property value, and foreclosure risk can matter more than stated yield. It helps to define likely exit points before buying, then reassess as payments, rates, property values, liquidity needs, and market pricing change.

Mortgage Note Investing: How Do You Decide When to Hold, Sell, or Buy More?

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