Note broker or note investor?

Many people who want to buy existing mortgages are not intending to keep them but will instead re-package them and immediately sell them on to an institutional investor, keeping for themselves a profit. 

Other people will buy mortgages and will keep them for themselves. They will service the mortgages and profit from any pre-payment. They are true note investors. 

OK you say, this sounds great,  but I don't have the funds needed to buy hundreds of thousands of dollars worth of mortgages. The answer is to find local private investors who will be satisfied with a lower yield than the yield you have negotiated and keep the spread or the back end of the mortgage.

Investors could be parents with a retirement fund, your own self-directed IRA, doctors, family members, friends with money to invest. Remember that people are naturally skeptical of being cheated. You MUST always act with the greatest integrity and protect your investor first, even if you lose money or have to work for nothing to resolve a problem.

This is not a get rich quick scheme, despite what the late night TV sharks will tell you, but a true way to generate real long term wealth. 

There are numerous ways to structure a transaction.

1. You can hypothecate a mortgage. 
   This means you borrow money using the mortgage itself, (not the real estate) as security. Of course, if you do not make payments then the lender will be able to take the mortgage and keep it. If the underlying borrower is not making payments, then the mortgage owner can foreclose the mortgage or deed of trust and get the property.
   Example: A mortgage has a $10,000 balance, being paid over 120 months at 10% interest per year. Monthly payments of $132.15. To check the monthly payment calculations, click here.
   You can buy this mortgage for $8,000 cash. The payments and term do not change but the yield does. It is 15.62% per year. To check this, click here.
   You borrow the $8,000 needed from your lender at 11% per year. You are going to make payments for 120 months. Your payments will be $110.20 per month. To check this, click here.
   For the next 120 months you keep the difference of $21.95 a month.
   Big deal you say. But how about if that was a $100,000 mortgage earning you $219.50 a month? How about if you had 10 just like that earning you $2,195.00 a month?
2. You could sell part of the note.
   This means you sell enough payments to cover the $8,000 investment and then you get back the "back end", the remaining payments. ideally you should be collecting the payments, but in most states you cannot service a mortgage for another person without special licenses. Usually a mortgage lenders license.
   Let's see how this would work.
   The mortgage is producing $132.15 a month. You agree to pay 11% per year to borrow $8,000. 
   This will take 89 payments. To check these calculations, click here. You receive nothing for the first 89 months (unless the mortgage pays off early), then $132.15 a month for the last 31 months.
3. You could find a money partner who would own a portion of the note and of all the payment streams.
   Example. You sell an 80% interest in the mortgage above for $8,000. Every month the partnership receives $132.15. Your money partner gets $132.15 X 80% = $105.72. You keep the remaining $26.43.
   Let's see what this earns for your partner.
   They are investing $8,000 and get back $105.72 a month for 120 months. Their yield is 10% per year. To check this, click here.

These are just some ideas. But one warning, banks typically will NOT lend money against a mortgage as security. Some will, but most won't.

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