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What opportunities will be available to note investors? How will they transition to maintain volume and flow?
The Changing Mortgage Loan Market
The note business has changed a lot over the last couple of years. We’ve had a huge influx of new note buyers and note businesses as people recognized the advantages and profits it can offer. At the same time, big note sellers have become far more selective in who they will sell too, and spreads have become tighter for bulk pools of institutionally originated notes. Yet, note investors are as hungry as ever for profitable deals, and many are flush with capital from recent successes.
How will the market react? What trends might we see emerging because of this? What opportunities are there for note investors?
With equity still growing, and bank lender competition to make home equity loans on the rise, we may see more HELOCs and 2nd mortgage notes becoming available. As performance continues to improve, many end investors are likely to choose re-performing notes for the optimal blend of safety and value. Performing notes can also offer stability and much needed yield to balance overall individual investment portfolios.
Buyouts & Mergers
It won’t be surprising to see more buyouts and mergers. It may be a great way for some smaller firms to up their competitiveness and power in the marketplace. Bigger firms, on the other hand, may use these strategies to continue growth and corporate performance.
More and more entrepreneurs are trying to integrate cryptocurrency with real estate. Expect this to eventually come to the note marketplace. One big effort to launch an ICO to buy the Plaza Hotel in NYC, which used to be owned by Donald Trump, appears to have failed but there is still lots of interest in these applications.
Diversifying & Adding Income Streams
Another way for note businesses to keep their numbers up is to diversify and add additional income streams and lines of business. Some may branch off and become loan originations. Others may flock to property management, or become more aggressive in foreclosing on non-performing or maturing notes and getting involved in property development.
Investing in Private Funds
Although many have been more reluctant to buy into publicly traded real estate stocks and REITs over concerns of volatility and interest rates, more money is being invested in private real estate related investment funds. Individuals plowed over $70B into these types of funds last year alone. They now hold over $1T in capital.
For those still looking for individual notes and small pools, keep an eye on the notes being released by NNG Capital Fund.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund