Hold or Sell Your Land Note? How Selling Works

Transcript of Module 11, lightly edited for readability. The video was recorded before we passed 250 notes; the figures on this page are current.

Welcome to module 11. You've closed the seller finance deal. Congratulations. The buyer made their down payment, the loan documents are signed, and professional servicing is in place. Now you have a decision to make. Do you hold the note for passive income or do you sell it for immediate cash? In this module, I'm going to show you how selling notes works, why it creates a massive advantage for active investors, what note buyers look for, and how to maximize your value when you sell. After closing, you have two options. Option one is hold the note for passive income. You keep the loan. The buyer makes monthly payments. You collect steady cash flow for the next five to eight years. This is great if you want passive income. If you don't need the capital immediately, or if you're building a portfolio of performing notes. There's nothing wrong with this approach. Many investors love it. Predictable monthly income is valuable. Option two, sell the note for cash at closing or anytime after. You close the deal, the buyer makes their down payment, and you immediately sell the note to a note buyer like me. You walk away with cash, both the down payment and the purchase price of the note, and you can reinvest that capital into your next deal immediately. This is what most active land investors choose to do, and here's why. Working with a note buyer creates a powerful synergy for active investors, and it's all about velocity of capital. Here's the concept. When you can turn properties faster, you can do more deals per year.

When you do more deals per year, even at lower per deal profit, you make more total annual income. Let me give you a concrete example. Scenario one, you're selling properties for cash only, but cash buyers are slower. They're pickier. They want discounts. It takes at least six months to sell each property. You do two deals per year.

and you make $50,000 profit per deal. Your total annual income is $100,000. Scenario two, you're offering seller financing and selling the notes at closing. You attract 10 times more buyers. You sell properties in two months instead of six. You do four deals per year. You make $40,000 profit per deal because you're getting the velocity advantage.

Total annual income, $160,000. Same amount of work, same properties, but more total profit. That's velocity of capital. Cashflow beats higher per-deal margins when you can move quickly. And here's the other advantage. You're not waiting five to eight years to get paid. You're getting paid at closing. That capital's liquid. You can reinvest it immediately.

and you can scale your business faster. This is why most active land investors work with note buyers. It's not because they don't understand passive income. It's because they understand that turning capital faster creates more wealth. So how much can you expect to get when you sell a note? The market rate for well-structured land notes is typically 80% or more of the loan amount, sometimes higher depending on the strength of the strength of the deal. Here's how the math works. You sell a property for $100,000. The buyer puts down $20,000 and you finance $80,000. You keep 100% of the down payment that's yours regardless. You sell the $80,000 note for somewhere between $64,000 to $70,000 depending on the down payment and the strength of the deal.

So depending on the down payment, you can receive 64 to $70,000 for the note, plus you keep the entire down payment. Compare that to selling the property for cash. A cash buyer would have asked for at least a 10% discount. You would have gotten $90,000 and it would have taken you six months to find that buyer. Instead, you got comparable cash and you sold it in two months.

That's the power of this model. When you sell a note, the buyer will ask for specific documentation. Let me tell you exactly what they need. They'll want the pay history from your servicer showing that the loan is current. They'll want copies of the promissory note in the deed of trust or mortgage. They'll want the lender's title policy that was issued at closing. They'll want property value data showing what the land is worth.

They'll want the borrower's credit score at the time of the original sale, and they'll want the closing statement proving that the down payment was actually made. The note buyer will pull their own title search at their expense to verify there are no issues with the property. If you've set everything up correctly, and if you've been following this course, you have, you'll have all of this documentation ready to go. This makes the transaction smooth and fast.

Note buyers evaluate deals based on specific criteria. Let me tell you what they're looking for. Strong credit and substantial down payment. The stronger the borrower's credit and the larger the down payment, the more valuable the note. This is why we emphasize proper screening. Note mortgage structure. Note buyers want notes and mortgages, not land contracts. This is why we structured the deals this way from the beginning.

The qualifying property type. The property needs to be marketable land that a note buyer is comfortable owning if there is a foreclosure. This is why we talked about having good properties. Professional servicing. Note buyers want to see that a professional servicer is managing the loan. This creates clean documentation and prevents disputes.

Clean payment history. If the loan is performing with no late payments, it's worth more. If there have been issues, it's worth less. Everything we've covered in this course, the screening, the structure, the documents, the servicing, was designed to create notes that are easy to sell at good prices. Here's the key takeaway. Setting up your loan correctly at the beginning makes selling it down the road much smoother. When you screen buyers properly, Structure the loan with the right terms, use professional documents, close through a title company, and put professional servicing in place, you create a note that buyers want to purchase. This isn't complicated, it's just about following the right process from the start. And that's exactly what this course has been teaching you.

Remember, you have two options after closing. Hold for passive income or sell for immediate cash. For active investors, selling notes creates velocity of capital and allows you to flip more properties per year. Notes typically sell for 80% or more of face value, plus you keep the entire down payment. Note buyers look for strong credit, substantial down payments, proper structure and professional servicing.

Set it up right from the beginning, and selling is easy. In the next module, we'll cover common mistakes to avoid and lessons I've learned from buying over 150 notes. Let's keep going.