Note investing vs. property investing — capital allocation
| Strategy | Yield source | Leverage |
|---|---|---|
| Buy performing note | Interest spread | Often none — cash |
| Buy distressed note | Foreclosure / mod | Legal cost + timeline |
| Buy rental property | Rent + appreciation | DSCR 5.75%–10.5% |
Seller-financing a flip exit? Compare note sale discount vs. hard money payoff from buyer at 8.99%–13.5%. Sell note Columbus · Sell note Philadelphia · DSCR hub.
Residential mortgage note buyers purchase private promissory notes secured by real estate — giving sellers lump-sum liquidity instead of waiting years for monthly payments. Investors searching residential mortgage note buyers, sell private mortgage note, and note buyers near me are usually note holders who seller-financed a disposition or buyers researching secondary-market pricing before they carry paper on the next exit.
Jaken Finance Group is primarily an origination lender for investor acquisitions — fix-and-flip, DSCR, bridge, and construction. This guide explains how note sales work, what buyers pay in 2026, and when new origination beats selling at a discount.
Note market snapshot (2026)
Performing first-lien residential notes trade at a discount to remaining balance — buyers target 9%–14% yield depending on payer quality, lien position, and seasoning. Rising benchmark rates since 2022 widened discounts on low-coupon seller paper (4%–6% notes sell at deeper discounts than 8%–10% notes with identical collateral).
| Note profile | Typical buyer yield target | Discount tendency |
|---|---|---|
| First lien, 12+ mo seasoning, clean title | 9%–11% | Modest discount |
| First lien, thin seasoning (under 6 months) | 11%–13% | Wider discount |
| Second position | 13%–16%+ | Steep discount |
| Weak payer / missing docs | 15%+ or no bid | Often unsellable until cured |
Illustrative — actual bids require full tape and market conditions.
What is a residential mortgage note?
When you sell a property and carry back financing, you become the note holder:
| Document | Role |
|---|---|
| Promissory note | Borrower’s promise to pay (rate, term, payment) |
| Mortgage / deed of trust | Lien on collateral securing the note |
| Payment history | Proof of performance for note buyers |
A note buyer purchases your right to receive remaining payments — often at a discount to face value — based on desired yield.
What note buyers underwrite
| Factor | Impact on price |
|---|---|
| Payment seasoning | 12+ on-time payments strengthens bid |
| Interest rate | Higher rate → less discount |
| Remaining term | Longer term → more discount risk |
| Collateral LTV | Lower LTV → better pricing |
| Lien position | First lien preferred; second position discounted heavily |
| Payer credit | Strong credit → tighter discount |
| Property type | SFR easiest; land and commercial priced separately |
Texas residential mortgage notes
Texas note sellers often search texas residential mortgage note buyer after:
- Seller-financed disposition of investment or owner-occupied property
- Partial retirement — prefer liquidity over monthly mailboxes
- Portfolio simplification — exit several small notes at once
Texas-specific diligence:
- Deed of trust vs. mortgage terminology in county records
- Non-judicial foreclosure — note buyers price faster enforcement favorably
- Homestead — investment-property notes trade more cleanly than ambiguous homestead files
For new Texas acquisitions instead of note sales, see hard money Texas and DSCR Texas.
Note sale vs. keeping the note
| Keep the note | Sell to note buyer |
|---|---|
| Ongoing monthly income | Lump-sum cash now |
| Foreclosure responsibility if default | Buyer assumes servicing (typically) |
| No discount | Accept discount to face value |
| Best when rate and payer are strong | Best when you need capital for next deal |
How much is my note worth?
Note buyers do not pay face value by default — they discount future payments to a target yield. The same note can receive different bids based on payer quality, collateral, and market appetite.
Illustrative discount math
Note face: $120,000 remaining balance, 8% rate, 15 years remaining, performing 18 months
- Monthly payment: ~$1,146
- Note buyer target yield: 10%
- Indicative purchase price: ~$105K–$112K (wide range — market-dependent)
| If target yield rises to… | Indicative range (same note) |
|---|---|
| 11% | ~$100K–$108K |
| 12% | ~$95K–$103K |
| 13% | ~$90K–$98K |
Second position, missing documentation, or weak payer credit can push discounts 20%–35%+ below remaining balance.
Actual bids require full tape: note, mortgage, payment history, title policy, and collateral appraisal.
Worked example: Philadelphia rowhome seller-financed note
Investor sold a Kensington rowhome with $45K down and carried $195,000 at 7.5% for 20 years. After 14 months of on-time payments, remaining balance ≈ $191,200.
| Buyer target yield | Indicative bid range (illustrative) |
|---|---|
| 10% | ~$168K–$175K |
| 11% | ~$162K–$170K |
| 12% | ~$155K–$163K |
Philadelphia-specific factors: BRT reassessment on collateral affects buyer’s long-term collateral view; rowhome party-wall title endorsements must be clean. Full city guide: Sell mortgage note Philadelphia.
Columbus Franklin County files follow similar math with different tax and title norms — see Sell mortgage note Columbus.
Second position and partial notes
Second position gap funding notes — related to gap lending request — trade at steep discounts because default recovery is subordinate.
Partial note sales (selling 5 years of payments, keeping the tail) are possible with sophisticated buyers but add legal complexity.
When origination beats note sale
If you are selling a note because you need capital for the next acquisition, compare:
| Path | Outcome |
|---|---|
| Sell note at discount | Immediate cash; lose future interest |
| Cash-out DSCR / refi on rental collateral | Keep asset; extract equity at lender LTV |
| Hard money on new deal | Preserve note income; finance next project separately |
Portfolio refinance · DSCR cash-out · Hard money
Preparing your note for sale
- Payment ledger — 12+ months documented
- Original note and mortgage — recorded lien
- Title policy — with endorsements
- Collateral info — address, occupancy, insurance
- Payer application — credit and employment (if available)
Investor lending from Jaken Finance Group (origination)
We fund acquisition and refi — not note purchasing — but our borrowers often create notes on disposition and later sell them:
Submit scenario · (833) 264-7776
This page is educational — Jaken Finance Group does not purchase mortgage notes. Note sale pricing requires direct quotes from licensed note buyers. Rates and terms on origination products are subject to underwriting.