Gemini Capital Managers

A Residential Mortgage Investment and Advisory Firm

Buying Discounted Performing Mortgages instead of rental properties

Gemini Capital Advisors has worked with a number of real estate investors who have converted from buying rental properties to buying discounted mortgages notes and trust deeds. There are pros and cons to both investment strategies which will be covered below.

Part 1: Buying Performing Mortgages Instead of Rental Properties for Cash Flow


  1. No Maintenance Costs
  2. Purchase Mortgages with a built in discount
  3. Ability for both monthly cash flow and windfall profits when homeowners sell or refinance to pay you off in full
  4. Less Competition from other investors since this is a growing niche market


  1. If a homeowner stops payment the foreclosure process is typically longer and more costly than evicting a tenant
  2. No leverage: There are few to no financing programs available to purchase discounted mortgages


  • Find an good source for buying discounted performing loans
  • Utilize a servicing company to handle your mortgage statements and customer service for the borrower.
  • Do your due dilligence including researching the property value for the mortgage you are buying
  • If the homeowner has financial difficulties offer to work out a win-win solution that avoids a long foreclosure battle and protects your equity. Read this article on working out win win solutions with borrowers when investing in distressed mortgages.