Advantages – and Disadvantages – of Selling Your Note

Advantages:

1. Use the cash to make another investment with a higher return.
2. Reduce debt – pay off a mortgage on your home or investment property.
3. Use the cash to pay a big income tax bill.
4. You are moving out of state and are uncomfortable being an absentee note holder.
5. You are downsizing – selling your business, selling your home, simplifying your life.
6. You fell in love with a new home and need more cash to buy it.
7. It is the only note you have ever owned and you just don’t like the inherent risk.

Disadvantages:

1. You lose the income from your performing note.
2. You lose the right to foreclose.
3. You lose the right to sell the note in the future for more money if interest rates go down.
4. You may have to pay tax on the income from the sale.
5. You lose the opportunity to borrow against the note.
6. You can never restructure the note to achieve a higher yield or earlier payoff.
7. 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.