Many investors purchase cash notes for sale because they can provide a good return on investment. A variety of cash flow notes exist, but the most common types used for investment purposes include real estate and land contracts, seller carry back trust deeds, structured settlement annuity payments and business notes.
Investing in cash notes for sale can be a profitable venture as long as investors understand the process and engage in due diligence. Cash flow notes are secured by some type of valuable collateral such as houses, corporate purchase orders or account receivables, or cash. Investors can resell cash notes to another investor for profit.
Real estate notes and land contracts use tangible property as collateral. Property owners can sell mortgage notes or trust deeds to investors. When sellers require a lump sum of cash they can sell all or part of the note to obtain necessary funds. When selling partial notes, the note holder assigns payment rights to the investor, but retains ownership of the property.
Another popular real estate cash flow investment is seller carry back mortgages. This type of financing is used when sellers carry back all or a portion of financing to a buyer. The seller acts as a temporary lender to assist the buyer in obtaining financing for a first or second mortgage.
When sellers provide full financing for real estate purchases, they become the first lien holder. If they offer partial financing, the buyer must obtain financing for the balance through a conventional lender. With partial seller carry back financing the seller carries the second mortgage.
Careful consideration should be given when investing in real estate notes. It is best to retain the services of a real estate lawyer to review real estate contracts, execute seller carry back mortgage contracts, and file property transfers.
Business notes can be a profitable cash flow note investment. Business owners use a variety of assets to obtain funds for expansion or when selling the business to a new owner. The most common forms of business cash flow notes for sale include factoring, purchase order funding, and seller carry back financing.
Business seller carry back financing is similar to real estate seller carry back mortgages, in that the business owner acts as the financier. With factoring, account receivables are sold to a funding source known as the Factor. Factors can include private investors, banks, credit unions, and investment groups. Purchase order funding uses customer PO’s as collateral for receiving advanced funds.
Structured settlement annuity payments are guaranteed through life insurance companies. Annuity payments are used to compensate individuals who have been injured due to negligence and to pay out jackpot lottery winnings.
Structured settlements are arranged to payout large sums of money over an extended period. Annuity payments are beneficial to injured individuals requiring long term medical care. Structured settlements ensure Annuitants receive necessary funds to receive required care and maintain a good standard of living.
Annuitants can sometimes sell all or part of annuity payments in exchange for a lump sum of cash. However, most states require Annuitants to appear in court and demonstrate a true need to sell annuity payments. Courts rarely allow Annuitants to sell annuities in whole, but will sometimes consider partial sales if it is financially beneficial.
Cash notes for sale are typically less risky than other types of investments. It is crucial to work with trustworthy people and obtain legal counsel. Taking time to thoroughly investigate the real estate or business asset can minimize risk factors and improve profit margins.
