Here is a deep dive into the mechanics, risks, and rewards of the secondary note market. 1. The Core Concept: Being the Bank
The borrower is paying on time. Your goal is passive income. You buy these at a modest discount to the face value to achieve a yield higher than traditional bonds or CDs. buy and sell notes
Even if the note is for $100k, if the house is only worth $80k, you are "underwater." Note buyers look for a "protective equity" cushion. Here is a deep dive into the mechanics,
The borrower has stopped paying. These are bought at deep discounts (often 30–60 cents on the dollar). The strategy here is "workout" or "liquidation": you either help the borrower re-perform, or you foreclose and take the property for a fraction of its market value. 3. The Power of the "Discount" Your goal is passive income