How to Define Systems & Build a Team When Investing in Real Estate Notes

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It seems like it was just yesterday when I started out as a note investor. In the beginning, I was mostly investing in real estate rental properties, and I was first introduced to notes on the private money and hard money side.

Since my income from real estate sales started to plummet in the last downturn, part of my strategy towards investing in distressed notes was to find a new source of income. So initially I didn’t have much of a process or system figured out for note investing.

Fast forward a few years, my partners and I, as well as all of our employees, have a working system in place for our growing note business. That being said, our processes are something that we continually work to further develop and streamline.

Related: Diversifying into Real Estate Notes? Better Choose a Strategy! Here’s How.

But whether you’re looking to note investing as an opportunity for passive income or as a more involved, active endeavor, having a system in place can improve the entire experience. Looking back, I wish that we had known this sooner, as being more proactive may have saved us time or even some opportunity cost.

So, if you’re currently learning more about notes or you’re getting started in the note business, here are some tips for building out a system for efficiently investing in real estate notes.

Starting Out

When my partners and I gathered up some capital and bought our first few non-performing notes, we had no clue what we were doing, but we were willing, and we proceeded to learn how to manage and collect on the assets. The bulk of this at the time was through trial and error.

Now, even though there’s a certain point when you just have to take action, there is definitely more note education available today for those who are just starting out (see recent article, “The Top 5 Resources to Educate Yourself on Real Estate Note Investing”).

Other than ourselves, we didn’t really have a team in place, let alone a process. When you’re just getting started, maybe your team is just you. Maybe you’re the one wearing all of the hats. But once you figure out what you’re good at and more importantly what you enjoy doing, then you can focus on that. The good news is you can outsource just about every part of the business. So for us, it’s helpful to consider which tasks are better outsourced and which should be kept internally.

Developing a Team

Once you know your goals with note investing and your strategy (see recent article, “Diversifying into Real Estate Notes? Better Choose a Strategy! Here’s How.”), it becomes easier to know what players you’ll need on your team. For example, if you’re investing in non-performing notes to rehab them, what you need may be different than if you’re investing in performing notes for passive income.

With performing notes, your team doesn’t need to be that big. In fact, the largest component is having a licensed, compliant servicer to handle anything from payment processing and accounting to sending letters to the borrower for you, as well as specialty servicing options in the event of default if you should ever need it. With non-performing notes, depending on your model, you may need to add a few more team members.

As you own more notes with various situations and circumstances, you’ll quickly see the need arise for many other third-party vendors to join your team. A potential short list of possible team members besides attorneys could include due diligence vendors, such as BPO (broker price opinion) vendors, credit report suppliers, property preservation companies, encumbrance and lien report sources, door knock services, software vendors, and compliant loan servicers. You may also need website developers, virtual assistants, various consultants, and REO agents, just to name a few.

Defining Processes

As you grow in activity and size, not only in outsourcing but internally as well, you’ll quickly see the need for more systems and processes. If you really think about it, all of your processes begin with you. They’re in your head, but until you get them on paper, and hopefully later into your database or software, it’s hard to gain any kind of efficiencies.

Related: Real Estate Notes vs. 401k: Which Investment Wins Out Over 30 Years?

Recently, I took the time to just to write out everything that I do on a day-to-day basis. By mapping out my workflow, as well as my department’s, it made it more clear what needed to be delegated or outsourced and what needed to be of higher or lower priority.

Some of you out there on BiggerPockets may already have experience creating processes and developing a team for your real estate business, so this may sound very familiar. Also, similar to real estate investing, what your model is and how far you go with it is really up to you.

Your note investing can really grow as far as you want to take it, whether you just want to accumulate notes for yourself or form a larger enterprise. The good news is you can always tweak the processes and systems to fit your future plans.

Where are you in your note investing journey?

Leave your comments and questions below!

About Author

Dave Van Horn

Since 2007, Dave Van Horn has served as president and CEO of PPR The Note Co., a holding company that manages several funds that buy, sell, and hold residential mortgages nationwide. Dave’s expertise is derived from over 30 years of residential and commercial real estate experience as a licensed Realtor, a real estate investor, and a fundraiser. As the latter, Dave has raised over $100 million in both notes and commercial real estate. In addition to his investments and role as CEO, Dave’s biggest passion is to teach others how to share, build, and preserve wealth. He authored Real Estate Note Investing, an introduction to the note investing business, helping investors enter the “other side” of the real estate business.


  1. Patrick Desjardins

    I think one of the big issues is that most of us start off as small investors and not as business owners, which have much different knowledge requirements. A lot of it must be business administration 101 stuff but we’re not taught it.

    For example when I started buying notes I had everything uncategorized in one Drop box folder. I kept some of the information in excel files but really, mostly everything was in my head – where we were in the notes resolution process, the vendors and their contacts, even some of the expenses.

    It took a while to realize “oh crap, what if something happens to me? I’m the only one who has the code to decipher what I’ve been doing”. I pictured my wife trying to figure out what we have and what she’s supposed to do with it. That’s when I realized we needed to keep much better records. Since then we’ve incrementally refined each aspect, from record keeping to due diligence to best practices.

    Imho that is the dark side of moving from an investment portfolio to a business – I would assume most of us don’t know much about setting up a business properly from scratch.

    It’s when you read about a Wall St guy starting a new 1 billion note buying fund that you realize the knowledge gap.

    • Dave Van Horn

      Hi Patrick,
      Thanks for your comment; you make a great point. When we started out, we used a contact management system that allowed us to take notes, categorize our contacts, and share documents. For me, another big help was reading the E-Myth, which discusses how to set up your business with systems and processes.
      I hope this helps!

  2. Cynthia Jacob

    Hello Ankit

    My son and I have decided to make a go at Investing into Tax Liens and Deeds. We have decided to look at investing in the Tri-State area; first starting in Queens, NY and next PA. Could you point us in the direction to start this journey? Thanks for your time.

    • Dave Van Horn

      Hi Cynthia,
      I’m not sure who Ankit is, so this might be on the wrong thread. Although, you could try self-directed IRA companies, as they usually have webinars, speakers, etc. discussing tax liens. If you would like me to name a few IRA companies who provide this, just shoot me a direct message.

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