Note Investing Fundamentals: The Very first MasterClass 2021

Real estate or mortgage note investing is a real thing and can provide millions in revenues. But you need to learn the note investing fundamentals before venturing out. 


If you have searched the term passive income, you must have come across the term " note investing." You probably know it is related to mortgages, but other than that, you drew a blank. That's why we have compiled a blog that covers everything related to note investing fundamentals.

So, let's start with the "fundamentals," shall we?

Note investing: What is it?

Suppose you want to buy a nice house, but pay the entire price in small installments. Or, you want to avail a loan against it. In both these cases, you would need to sign a document or a "note". It will state that the applicant will pay the money (with or without interest) throughout a certain time, like a promissory. 

These notes can be later purchased by other entities or individuals. Banks, mortgage brokers, and other investors can sell them. In some cases, one can create these documents, and sell them within the network.

What are the types of notes?

●     Performing notes (the lender focuses on the amount he is currently getting, as the payment is scheduled by the recipient himself). The risk, in this case, is significantly lower, and many prefer this option. It includes:

a. modified loan notes (terms are different from the original loan documents),

b. Private finance notes (it is used when an individual lends the money instead of a financial institute. This option is for those people who don’t have access to the traditional financial institutes)

c. Hard money loans are available only for investors, who can again sell them to borrowers. These are usually provided for the short term.    

●     Non-performing (the borrower does not promise anything, and the loan amount is modified to accommodate discounts, etc.). The discount rate can be anything from 50% to 90%. The risk is higher, therefore, only people with solid knowledge must use this option. 

How to do it?

When you decide to invest in real estate notes, you get two options:

  1. You can purchase the old notes

Lenders can sell the note to an investor after going through the proper validation. A person can call different institutions to get these notes, and the borrower will have to pay the money directly to him or her. The best way to gather information on this subject is through a dedicated network.

But for a beginner, this can be hectic, because it would require a lot of time, energy, and patience. Without proper guidance, it’s quite difficult to navigate through this area.         

  1. You can invest in funds  

Investing in funds is another option you have, albeit it is a passive one. In this method, you can mitigate some of the risks, and diversify among assets.

There are multiple benefits of note investing:

●     You don’t have to worry about managing and maintaining homes and buildings

●     A profitable option of investing without any security risks (the lender can decide to foreclose the property if the borrower is not paying money as per the promissory)

●     Investors can buy these notes at a cheaper rate

We will discuss more note investing fundamentals in the upcoming blogs. Stay tuned until then, bye.

Location: United States

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