Is 2010 a Year of Recovery for Mortgage Notes? |
| To say that 2009 wasn't the best year for mortgage notes would be an oversimplification. If you chose to buy a seller-held mortgage note during this period you may have tapped into some unprecedented opportunities by identifying the advantages of private notes in a less than ideal economic climate. |
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While housing prices dropped, this went hand in hand in a decline in the percentage of people able to qualify for competitive conventional mortgages after financial institutions grew cautious about extending loans. Furthermore, while demand slumped in the market, the actual demand for living space depends on population, making multifamily dwellings an excellent option. People didn't buy as many houses, but they still needed a place to live.
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| What's going to happen in 2010? It looks like once again, an uncertain real estate market will encourage custom, private mortgage notes and investment in multifamily dwellings. One big indicator is December 2009's job figures, which showed that unemployment didn't shrink. Obviously, less employment reduces the demand for single family homes, but people still need places to live so they'll turn to apartments and other rented dwellings until they can confidently pay a mortgage.
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That's what makes investing in a private mortgage note for a multifamily dwelling a smart option. The demand isn't going away, so it's easier to maintain confidence in the borrower, since his ability to meet his obligations is enhanced by willing tenants.
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| With regard to other seller-held mortgage notes, deeds of trust, land contracts and similar instruments, these may be the only way to turn real estate into a competitive investment. If you just go through an institution that offers a standard note on your behalf you may be forced to take less on your home or other property than you'd like. Use a custom seller-held note to offer better terms and you're more likely to get a superior return on your investment.
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| It may sound like we're saying 2010 will just be more of the same, but that's not true. Institutions are recovering and while unrealistic bubbles aren't going to come back any time soon, the real estate market will eventually emerge stronger than ever thanks to the last decade's hard lessons.
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| Part of those lessons is that banks and loan institutions aren't as infallible as they were assumed to be, and that far from being a marginal option in the real estate market, seller held mortgage notes represent a critical avenue to maintaining the vitality of the market. They're here to stay - and to ensure that you have the widest array of options possible to manage or sell your note, mortgage note buyers like DMO are here to stay as well.
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