Note brokers connect buyers and sellers of cash flow notes. They are usually referred by investors or businesses looking to improve their cash flows. The income potential for this type of business is unlimited.
Despite what infomercial seminars claim, this is not a get rich quick scheme. This is a small business that requires hard work and commitment.
Education and Training Requirements
There are a few education and training requirements that you’ll need to meet in order to become a note broker. These include an understanding of real estate investing and the legal aspects of note brokering. In some states, you’ll need to obtain licensing from your state’s department of real estate in order to practice professionally.
It’s important to understand that finding note buyers is the most important part of a successful note brokering business. Sadly, many of the seminar and course promoters don’t even realize this. They give their graduates a three or four letter designation much like those given to Realtors (r) but the only thing that these letters mean is that the bogus ‘note buyers’ they list won’t work with them.
Our training in sourcing bank direct notes paired with our tool, Bank Prospector is an unbeatable combination for anyone serious about starting or growing their note brokering business. This is the only way to reliably find the buyers that will take your offers.
Making Money
Note brokers make money by helping buyers or sellers of commercial paper, such as real estate notes. The business is a service industry, and you’ll have to be available during normal business hours to communicate with title companies, lawyers, investors, banks and courts.
Many note brokering infomercial seminars claim you can work this business from home and be a millionaire within a year of attending their program. This isn’t realistic for the majority of people, and it speaks to the high level of competition in this market.
Note investors can buy deeds of trust and mortgages, recast them for greater profits, keep part of the note and sell another portion or use them as down payments on other real estate. The most lucrative participation option, however, is being a finder for other note brokers or investors and earning a referral fee. Professional note brokers also have post-closing responsibilities that they must manage, including monitoring payments and alerting clients when a payment hasn’t been made in a timely manner.
Post-Closing Responsibilities
A note broker is the go-between for businesses seeking cash from their accounts receivable and investors looking for innovative places to put their money. A successful note broker can connect buyers and sellers of notes and other commercial paper with ease.
The note buyer funds the transaction and pays a referral fee to the broker or finder at closing. Post-closing duties include confirming the purchase and sale is in accordance with state law and preparing loan transfer documents.
Some brokers take a full-service approach to their business, negotiating and selling individually held seller financed notes to investors on behalf of private note holders. The responsibilities of these types of brokers can be complex and require a substantial amount of time to complete.
It is important for note brokers to know what they are dealing with and to have an accurate picture of the underlying mortgage notes that they are purchasing. Some unethical companies will quote a price for a note and then lower it later, blaming the change on the property buyer’s credit.
Industry Trends and Regulations
Note brokering is a way for investors to make money by connecting people who have notes with those looking to buy them. These notes can be real estate or business notes. Typically, brokers get paid a commission or spread for their services.
A person who wants to start their own note brokerage company should secure the necessary licenses from their state before getting started. They may also have to form a corporation, purchase bonding insurance and open an escrow account.
The best way to learn the business is to work with someone who already has a successful note business. However, note brokering can be done solo as well.
Having a strong network of clients is crucial to success in this niche investment field. It’s important to be responsive to inquiries, transparent about fees and costs, and offer helpful advice when needed. This can help a note broker build long-term relationships with customers that can yield significant profits.