Advantages:
- Use the cash to make another investment with a higher return.
- Reduce debt – pay off a mortgage on your home or investment property.
- Use the cash to pay a big income tax bill.
- You are moving out of state and are uncomfortable being an absentee note holder.
- You are downsizing – selling your business, selling your home, simplifying your life.
- You fell in love with a new home and need more cash to buy it.
- It is the only note you have ever owned and you just don’t like the inherent risk.
Disadvantages:
- You lose the income from your performing note.
- You lose the right to foreclose.
- You lose the right to sell the note in the future for more money if interest rates go down.
- You may have to pay tax on the income from the sale.
- You lose the opportunity to borrow against the note.
- You can never restructure the note to achieve a higher yield or earlier payoff.
- You lose the ability to use the note in trade for real estate or something else of value.
Disadvantages – courtesy of Bill Mencarow, www.PaperSourceOnline.com.
