A note broker facilitates the buying and selling of promissory notes, offering expertise and guidance in real estate transactions involving these legal documents.

Mortgage note investing can be a profitable way to make money without owning real estate. However, it’s not without risk. Whether you invest in individual notes, bundles of mortgage notes or purchase whole pools of them, your success depends on your understanding of the mortgage note market.

Some seminar hucksters claim you can start a mortgage note brokering business for the same amount it costs to open a McDonald’s franchise. This is false and misleading.

Find Notes For Sale

Note brokering is an excellent way for real estate investors to earn a lot of money quickly. However, it is a competitive area that requires a bit of time and money to get started. Luckily, many note brokers start out as one-person businesses and can operate on low expenses until they are profitable.

Some companies that buy notes will check the property buyer’s credit prior to quoting a price for the seller. This is called “bait and switch” and it is unethical.

A good way to find potential buyers for your note is to attend local business functions related to real estate or finance. You can also join real estate or mortgage broker associations. These groups often have members who create seller-financed notes on their properties and want to sell them. Attending these events is an excellent way to network with other professionals and find property sellers looking to sell their notes.

Find Investors

A note broker acts as the financial matchmaker, seeking out note holders receiving payments and connecting them with investors wanting to buy the notes. This is an incredibly lucrative business and can be very profitable if you know how to find the right deals and connect with the right people.

Investors for mortgage notes come in all shapes and sizes, ranging from large financial institutions like insurance firms and university endowments to small mom-and-pop investors looking for a higher rate of return on their investments. Many of these investors use their self-directed retirement accounts, like IRAs and Roth IRAs to invest in real estate notes.

Finding a source of good debt deals is the most important thing you can do as a new note broker. Some note brokers focus on buying distressed loans from banks, allowing them to cherry pick the best loans for their portfolio. Others seek out fellow note investors who own seller financed notes. These investors may want to get rid of the notes due to changes in their personal situation or need for cash.

Sell Notes

Note brokers connect people who carry some form of promissory notes (most often real estate or business notes) with note buyers/investors who want to purchase the note. In return for their services, they receive a commission on the sale of the note.

Selling a note gives the note seller an infusion of cash that can be used to capitalize on an investment opportunity, pay off debt or loans or accomplish other time sensitive goals. It’s not the right choice for everyone but has proven extremely useful and profitable for many note holders.

Not all notes are ideal for sale and some are actually not worth purchasing. This is typically because of non-performing borrowers who miss or are behind on payments. It’s also common for some note sellers to choose a partial purchase option where they sell some of the future payments and retain the rest of the note.

Earn Commissions

Whether you’re representing institutions or individual note holders you can earn a good income. This is a service industry and the more you serve both note sellers and investors the better your business will do.

It is important to understand that you need a significant amount of networking and knowledge of the finance world to be a successful note broker. This is why many people who want to start this type of business opt to take college level finance courses or work for a brokerage firm to get experience and learn the business.

If you decide to take a seminar that claims to teach you how to become a note broker be sure to check the company out with the Better Business Bureau. There are many scams out there that claim to offer a low start up cost and over night riches. Be careful! Start small and work your way up. If you do that you’ll be very happy with the results of your efforts.