Managing tenants, paying for maintenance, and dealing with unpredictable property expenses can wear down even the most experienced real estate investor. That’s why many are now switching from traditional rental properties to real estate mortgage notes. It’s a smarter, more passive way to generate consistent income.
This article explains the shift and shows why buying and selling real estate mortgage notes could be the better option for you.
The Problem with Rentals
Owning rental properties has long been a popular wealth-building strategy. But it comes with real challenges:
- Tenants don’t always pay on time.
- Maintenance issues can drain time and money.
- Property taxes, insurance, and repairs eat into profits.
- You’re still responsible even when units sit vacant.
For investors looking for less active management, trading real estate notes is becoming a more attractive solution.
What Are Real Estate Notes?
When a homebuyer takes out a loan, they sign a promissory note—a legal document promising to repay. The lender can sell that note to someone else, who then becomes the new note holder.
By purchasing mortgage notes, you step into the lender’s shoes. The borrower pays you, not the bank. These are known as cash flow notes and can be purchased from banks, hedge funds, or private sellers.
The Advantage of Switching to Notes
Here’s why flipping real estate notes or buying to hold might be the smarter move:
- No tenants, no toilets. You don’t manage a property. You just collect payments.
- Passive income. You earn interest and principal monthly.
- Scalable. You can hold multiple notes without the overhead of managing multiple properties.
- Discounts. You can often buy notes below face value, boosting your return.
Example: Rental vs. Note
Imagine you own a $150,000 rental property that nets you $800/month after expenses.
Now imagine buying a $150,000 performing note at a discount for $120,000, paying 8% interest. You collect $1,000/month—and there are no expenses. That’s the power of purchasing mortgage notes.
Where to Start
If you’re wondering how to find real estate notes for sale, start with note brokers, online platforms, and banking contacts.
And if you’re holding a note and considering a sale, this guide on how to sell a mortgage note breaks down the process clearly, including how to maximize your return and avoid common mistakes.
Conclusion
Buying and selling real estate mortgage notes is not just a trend—it’s a strategy that gives you control, predictability, and true passive income. Whether you’re tired of landlording or just want to diversify, flipping real estate notes or wholesaling mortgage notes may be your next move.
Start now. The switch could be the smartest decision you make this year.