Exit Strategies: Hold for Yield vs. Resell as RPL
Once you have acquired a S&D loan and cured the defect, you face the ultimate investor decision: hold for long-term cash flow, or sell for an immediate capital gain? Both strategies are highly lucrative, and advanced operators use a mix of both depending on their capital needs.
Strategy 1: Hold for High Yield
Keep the note in your portfolio and collect monthly principal and interest payments passively.
Strategy 2: Resell to Aggregators
Package cured loans and sell them back into the institutional secondary market for capital gains.
Hold for High Yield
When you buy a loan at a discount, your effective yield skyrockets. If you buy a $100,000 note with a 6% interest rate for $75,000, the borrower pays 6% on the full $100k balance ($6,000/year). Because you only invested $75,000, your actual cash-on-cash return is 8%. Add in the principal paydown and total returns frequently push into the 10–12%+ range, entirely passively, secured by real estate.
Resell as an RPL
Institutional aggregators and Wall Street hedge funds have an insatiable appetite for Re-Performing Loans. Once you have cured the document defect or established 12 months of clean payment history, the loan is no longer “Scratch and Dent.” You can package your cured loans and sell them to larger funds at 90–95 cents on the dollar. If you bought at 75 cents, cured in 6 months, and sold at 95 cents, you capture a massive rapid capital gain — allowing you to recycle your capital into the next trade.