What’s a “Partial” and Why You Should Know About It
When you’re dealing with real estate investments—and sometimes family-law matters around equitably dividing property or business interests—it helps to understand the tools investors use. One of those tools is a “partial” note. The video “Note Investing: What Is A Partial?” explains how investors create partials and why it matters.(YouTube)
In plain terms: A partial is when the original lender (or note holder) keeps a portion of a real‐estate note and sells the remainder to another party. The buyer steps in for part of the risk and reward; the seller retains the rest.
Here’s how it works, why investors use it, and what a family lawyer should keep in mind when clients’ interests touch real‐estate debt.

How a Partial Is Created

1. Start with a performing real‐estate note. An investor has a note backed by property—say a homeowner making payments under a mortgage or trust deed.
2. Decide to sell part of the note. Instead of selling the entire note, the holder retains, for example, 30 % of the remaining balance and sells the other 70 %.
3. Allocate cash and rights accordingly. The buyer pays a price for the portion being sold; then the parties agree on how payments from the borrower will be split (or reported), how servicing is handled, how default risk is shared, etc.
4. Document the partial sale. There must be a contract or partial assignment of the note (or beneficial interest) specifying the split, rights to payments, duties of parties, servicing details, and how future events are handled (default, modification, payoff).
   The video shows that this is a method to create value and share risk, rather than simply holding the entire note or selling it outright.(YouTube)

Why Investors Use Partials
From the investor’s perspective, creating a partial offers several advantages:

• Liquidity while retaining upside. By selling part of the note, the original holder gets cash now, but still participates in future payments or perhaps future payoff benefits.
• Risk management. The seller reduces exposure (if the borrower defaults later) by off-loading part of the risk. The buyer takes on that portion, expecting higher yield.
• Flexibility in servicing and strategy. The parties can agree on how to handle future workouts, modifications, or payoffs. For example, the seller might retain servicing rights or maintain control over modifications while sharing payoffs.
• Yield enhancement for the buyer. The buyer acquires a portion of the note with a negotiated yield, often higher than standard loan investments because the structure may be more complex or riskier.
  The video emphasizes that while partials are common in the note investing world, they carry complexity—especially around servicing, default risk, and legal documentation.(YouTube)
• Valuation complexity. A partial note is not simply 70 % of the face value. The value depends on remaining payments, interest rate, borrower quality, property value, default risk, servicing costs, etc. Lawyers should involve a note/real‐estate specialist when valuing such an asset.
• Tracing the rights and payments. If one spouse sold part of a note, payments may split between parties. It’s important to understand how payments flow, who services the note, and whether the servicing rights remain with one spouse or were transferred.
• Tax and income implications. Note payments received after a partial sale may generate taxable income or capital gain/loss, which can affect support, property division, or carry‐forward deductions. If you buy the note in your self directed IRA, then these elements will not affect your reportable income.
• Default or payoff events. If the borrower pays off early or defaults, the partial sale agreement often dictates how the proceeds are split. Make sure the solution for this is clearly laid out in your contract to buy or sell a partial
• Documentation and control. Who has the servicing rights, who makes decisions about modification or foreclosure, and how are costs shared? These can all affect value and future litigation risk.

Key Terms 

• Beneficial interest / assignment-in-trust deed context: The buyer will often acquire the “beneficial interest” in a portion of the note rather than a full traditional mortgage lien.
• Servicing rights: The contract may assign who collects payments, tracks payoffs, handles defaults, etc.
• Payoff split / default proceeds split: The partial sale agreement may state explicitly how payoff amounts or foreclosure recoveries are divided between seller/retained portion and buyer portion.
• Yield to maturity / residual yield: Since the note is split, the seller retains the chance for residual benefit (after buyer portion is paid out) which affects valuation.

Bottom Line
Partials aren’t everyday tools in mainstream real estate—but in the note-investing world they’re used to gain flexibility, liquidity, and risk management. For family law clients who hold notes (or who have interests in companies/vehicles that hold notes), understanding that a partial note is not simply “I own 70%” and “you own 30%” without consequence is critical. The value of the split depends on the terms, servicing obligations, future events (default, payoff, modifications), and tax treatment.