Yes, you can sell a promissory note on land. While land notes are tougher to sell, they are sellable to the right investor. As a matter of fact I am working on buying a farm land note right now. In order to sell a note on land, you will need to have a nice down payment. I’d say 30% or more. It also helps if the land is improved or is income producing like farm land. Also. be sure the terms are attractive with the amortization period not too long and the interest rate is above market rates. I’d suggest 8% to 10%. Bottom line is you can sell a promissory note on about anything if the down payment and terms are attractive.
I was working with a private note seller about his note recently. The original issue date was in 2007 so it should command a good price all other things being considered. As I was collecting his documents, he mentioned that the borrower had been paying cash. That’s a big red flag. It Turned out the buyer had been paying cash since day one except for the most recent three months. I had to break the bad news to him that his mortgage note essentially had only three months of seasoning, which will lower the price of the note. So if you’re holding a seller financed mortgage note, please be sure and make your borrower either pay by check or a money order and keep copies of every payment. You might even want to deposit the money separate from any other deposit just to be sure you have a great payment history. You’ll put more money in your pocket when you sell a note to a note buyer.
I worked up a quote for a note holder in NY wanting to sell a note with a 4% interest rate for 20 years. It was unfortunately below what she hoped it was worth. The reason was that when discounting future incomes, the lower the rate and longer the period, the steeper the discount. This will be the case for any note buyer. Please keep that in mind when creating a private mortgage note. It will mean a lot more money in your pocket whether you sell the note or hold it for the monthly income.
I get calls from note sellers wanting to sell a note for all cash who just can’t afford to sell their mortgage note at the going price due to the terms (low interest, bad credit of the borrower, or lengthy term of the note). There is a great option for these note sellers. It’s called a partial and nearly every time a partial sale of a note is a significantly better deal. As a matter of fact, I usually recommend a partial.
So what is a partial note purchase. While partial note purchases can take many forms, most involve the purchase of X number of months of mortgage note payments. At the end of that period, the monthly payments and note revert back to the note seller. The note seller can start receiving payments again or sell the remainder of the note, which will have significant seasoning by that time and therefore fetch a very good price. So whether you call me or another note buyer about selling a note, get a quote on a partial along with your full purchase quote. You may be pleasantly surprised.
