BiggerPockets

Amy,

Notes can be very rewarding, but you must put some work into it. You will see a couple of infomercials that make it seem easy, Russ Dalby & American Cash Flow, while it isn't that difficult of a subject to get involved in, it is a business, and takes effort.

I have been involved for years in the note industry. It has its good days and bad.

Noteworthyusa.com is the site and Marc is absolutely right. They have some of best information and are linked with the top individuals in the industry. There is no better place to learn about the note business and make contacts with those who will really help you make it work.

Quincy,
I am not sure what this has to do about the original question, "how to make money with notes", but, I'll bite! How do we protect ourselves right away in case of default?????

Well making money with notes is pretty simple. You just sit there and collect checks, there is no hassle.

The actual work comes in protecting yourself from losing your investment. This is the most important part. Is all about the right set up so that you can recoup your investment.

Here's how I do it:

Make sure the underlying property is under a comfortable CLTV ratio. For my company, is 65%. This gives me a lot of leg room if the borrower defaults.

Stay away from owner occupied homes because of usury laws and other hiccups that you just don't want to deal with, there are way too many good deals out there for everyone so you don't have to mess with novice investors.

Keep your loan term short to reduce ill-liquidity.

Be the senior lien, only come in as a junior lien if you know what you're doing. If ever, the borrower were to default, you can initiate foreclosure as a strategy to recover your principal.

Make sure you record the deed with the county that the underlying property is in.

Check out the prelim, make sure that's ok. Have the borrower pay for title insurance. Get a recent appraisal.

Sometimes I even have the borrower personal guarantee the lien on top of the property.

Make sure you have the power of sale clause in your note and deed so that you can foreclose either with or without the court. Choosing to foreclose with our without the courts depends on the situation.

Depending on the nature of the note and deal, you will need to line yourself up with a notebuyer to cash you out as another exit strategy.

This is some of the basics. I hope this helps guys.

Back to the original question 'how to make money with notes?' There are PLENTY of ways. I just described the most basic one.

Did you guys know you could create a win-win-win situation and profit off mechanics lien that are in default?

http://www.dre.ca.gov/pdf_docs/re35.pdf

check here for more info

I agree Quincy, if you are going to buy notes for your own account, a good note broker is the best place to go!