The Best Markets To Buy Mortgage Notes In 2016

Tara Mastroeni
Published: July 8, 2016 | Updated: October 29, 2023

modern-buildingWhen it comes to buying property, there are three things that matter most, as the saying goes: “location, location, location”. Before you place a mortgage on a residence or a business, there are plenty of things to consider besides the home or business’ location, but the geographical region of the structure can have a major impact on its present and future value.

If you are an investor ready to add mortgage notes to your portfolio, you should definitely consider your prospective property’s location since this vital aspect could impact its value and your own net worth in the long run. To achieve the best return on investment (ROI), it’s crucial to identify where to invest in real estate in 2016.  

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How Seller Financed Mortgages Operate

As its name indicates, a seller financed mortgage is a transaction between the seller of a home or a business and the buyer. The seller liquidates the property in exchange for receiving from the buyer a down payment (which the seller doesn’t always require), and mortgage payments from the buyer, which are always required. The parties sign an official agreement that gives the contract the same legal credence and opportunities for recourse as a conventional bank loan.   

As with a bank loan, the property buyer gives the seller monthly payments until the principal loan amount is paid off. After the mortgage repayment period ends, the buyer owns the real estate free and clear, as they should would in the case of a traditional home loan or business loan. At this point, the mortgage note no longer has value to the seller of the home or business, who often uses the proceeds earned from holding the note to buy additional mortgage notes.   

Advantages of Seller Financed Mortgages

When we think of the advantages of seller financed mortgages, we usually consider them from the perspectives of property buyers and property sellers, but the benefits of seller financing for mortgage note investors should be considered, too. The reason is obvious: For both private and institutional investors, the vast majority of their portfolios often consists of mortgage notes. Here are some of the basic benefits of seller financed mortgages for all three parties.

  1. Advantages for Buyers

For real estate buyers, the primary benefit of seller financed mortgages is the ability to buy property while having a low credit score and not much liquidity — two factors that often preclude other financing options. In addition, if they are unable to make mortgage payments for a period of time, the seller may be more flexible about recovering outstanding payments than a financial institution. Regularly paying on the mortgage can also help buyers improve their credit scores.    

  1. Advantages for Sellers

For sellers, the major benefits of seller financed mortgages are the chance to sell their houses and buildings quickly by foregoing a third party’s loan approval process for a prospective buyer, and the opportunity to receive an interest rate and/or mortgage payments that are higher than normal for the property in question. Since the buyer has few, if any, other financing options, they are motivated to accept the high numbers for the sake of owning a home or a business.

  1. Advantages for Investors

For mortgage note investors, the chief advantage of seller financed mortgages is the opportunity to buy a variety of short-term and long-term notes that institutional lenders, such as banks and credit unions, would be unlikely to sell. The more monthly income a mortgage note generates, the more the note is worth to its holder. There are several factors that impact the value of a mortgage note, but the location of the property that the note represents is near the top of the list.    

Where to Invest in Property

Just as the best markets for buying homes can fluctuate from year to year, the best markets for purchasing mortgage notes follow suit. After all, the value of mortgage notes is largely based on the value of the homes in their respective markets. With this in mind, let’s take a look at where to invest in property this year, with an emphasis on where to invest in real estate mortgage notes.architecture

  1. Portland, OR

Portland is widely considered the most affordable state on the West Coast.This bodes well for home loan providers, as it increases the likelihood of regular payments across the life of a loan. By extension, the situation bodes well for mortgage note holders, as the value of their notes increases due to regular payments. Portland is experiencing rapid urbanization and gentrification that make it an increasingly desirable metropolis for dedicated urbanites.

  1. Austin, TX

To Generation Y — also known as the Millennial generation — Austin, Texas may be most familiar as a mecca for alternative rock music, but the city is a draw for Millennials due to its high level of affordability and comparable cultural experience to much pricier coastal cities. Younger adults just entering the workforce also like the city thanks to its rapidly growing tech hub. With Austin’s stable economy and variety of plenty of well-paying IT jobs, home investors will delight in this burgeoning market.

  1. Suburban Florida

Florida’s suburbs have long been a destination for retirees whose idea of “the golden years” includes lots of fun in sun. However, suburban Florida is also a popular destination for non-retirees who are in the market for vacation homes. When it comes to home buying, both groups share certain fiscal similarities: They tend to be financially stable, which makes them the ideal type of home or business buyers you want to receive payments from if you hold a mortgage note.

As with any coastal area whose real estate is directly affected by marine weather, be sure to perform your due diligence and research whether the area — or the particular property you’re interested in — has a history of tropical storm damage that has previously displaced residents and business owners. Your goal should be to choose a property whose note is least likely to experience a temporary discontinuation of payments for any reason that the buyer or seller can’t control.        


  1. Grand Rapids, MI

In terms of the real estate market, Michigan is one of the states that the recent recession hit the hardest. Filled with abandoned, boarded up homes and businesses, parts of Detroit looked like a ghost town for years. Fast forward to today, and you’ll notice that Michigan is slowly on the way to financial recovery. Nowhere is this renaissance more evident than in Grand Rapids, which boasts a booming healthcare economy and multiple advanced manufacturing firms.

Today, as was the case in many other traditional river cities, Grand Rapids no longer relies so heavily on manufacturing river freight to bolster its economy. The city’s self-sustaining healthcare industry and nationally recognized, advanced manufacturers help create a thriving economy that has a relatively low unemployment rate. If you’re looking for where to invest in property in 2016, put Grand Rapids on your short list of prospective cities.      new england house

  1. Raleigh-Durham, NC

Like Austin and Grand Rapids, Raleigh-Durham is a fast growing tech and business hub that attracts new workers and encourages established employees to put down roots, and make the city their official home. Like other up-and-coming cities, Raleigh-Durham has its own cultural flavor, but many homebuyers find the city comparable to San Francisco in terms of waterfront living.      

The difference is that living in Raleigh-Durham typically doesn’t cost nearly as much as living in the Silicon Valley or the Bay Area. From the perspective of a mortgage note investment, this is always a good thing. The more disposable income homeowners and business owners have, the less likely they are to default on a mortgage. As a cost-effective alternative to San Francisco, Raleigh-Durham is a fine choice for an investment.  

Who We Are

Amerinote Xchange is an institutional investor that specializes in acquiring mortgage notes. We purchase residential and commercial mortgages in all 50 states, and focus on acquiring 1st position mortgage loans that are defined by specific financial criteria. In all cases, we strive to offer sellers great prices for notes we acquire, so they can use the money to advance their  financial interests, just as we use payments on the notes we acquire to advance our own.  

If you have a residential or a commercial mortgage note that you would like to fully or partially liquidate for a lump sum payment, please call us today at (800) 698-3650, or fill out the contact form on our website. We’ll evaluate your note for free, and then propose a competitive offer if the mortgage meets our selection criteria. We are proud to offer the option of monetizing mortgage notes into lump sum payments that enhance the financial autonomy of the seller.