Rising Interest Rates? Consider Owner-Financed Notes (OFNs) for High ROI & Liquidity
As interest rates rise, investors are seeking alternative options for attractive returns. Owner-Financed Notes (OFNs) are an increasingly popular choice, offering high ROI and significant liquidity. These investments present a unique opportunity with lower liquidation risk compared to higher tiers. Explore the benefits of OFNs and diversify your investment portfolio today!
The possibility of rising interest rates has many investors looking for other attractive options. One popular choice is Owner-Financed Notes or OFNs. They offer the investor a high return on investment and provide significant liquidity once purchased by others who want an opportunity that will not be available in higher tiers with low liquidation risk.
Many small investors may have purchased or lent money to an OFN in one form or another. Some small lenders may purchase used mobile homes, fix them up, and use an OFN to sell the mobile home.
OFNs are also commonly used for home purchases, mainly when the buyer’s credit is too low for standard financing through a bank or credit union (or has other issues, such as a judgment or bankruptcy, which may disqualify them from a regular mortgage).
As a market, OFNs are not commonly found for resale. A few websites offer purchase terms but are few and far between and have little active marketing.
We are building an active brokerage for Owner-Financed Notes, but since the notes are created individually, people do not know that they can receive good cash value for their notes. We aim to let people know that they can receive good value for their notes and that a market exists.
OFNs can bear a higher risk than mortgages and consumer loans. They are typically made between individuals, and the borrower tends to have a lower credit score or some other significant credit risk. However, suppose a mortgage with good equity secures the note. In that case, the risk is significantly decreased, and the note bearer can have confidence it will be repaid by the borrower or the equity in the property.
Due diligence is critical, each note has a complication that increases its risk, and you must know what is happening before you purchase. There is a reason that the borrower cannot or will not go to a formal lending institution to borrow money, and you have to know what that is before buying the note.
The benefit of buying OFNs will come in an environment where interest rates are rising. What may occur is that OFNs may become more common as the role of individual lenders and banks may swap, where the interest rates banks offer will be too high, and individual lenders may have the most competitive rates.
If and when that scenario occurs, OFN markets will increase, and borrower quality will improve as savvy borrowers will know to look outside traditional lending markets to finance their homes.
We’re excited, seeing increased interest in OFNs, and are gearing up to be a significant buyer and broker nationwide. The OFN market has not seen considerable exposure from an active investor market, and we will be ahead of the curve when it hits.
In conclusion, investing in Owner-Financed Notes (OFN) may be wise for those looking for alternative investment options in today’s market. These notes are often used by small investors who want to quickly sell a property for cash without going through the traditional lending process with banks or credit unions.
Small Investors & OFNs – Profit from Used Mobile Homes with Owner Financing
Additionally, OFNs are an excellent option for those who purchase mobile homes, fix and resell them, providing financing options for buyers with lower credit scores. With the potential for rising interest rates, investing in OFNs may yield a strong return on investment and a large resale market. Are you considering investing in OFNs? To learn more about Owner-Financed Notes, read our article Ultimate Guide to Selling Mortgage Notes.