The 8 Non-Negotiable Habits of a Successful Note Investor

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Let’s be clear: There is an infinite number of roles you can play either as a note investor or with one. For example, you could be a very active note buyer, doing or overseeing much of the work yourself, or you could be more passive, investing in performing notes or even a note fund. Some folks may be a JV partner with note investors, while others may broker notes. Most of the habits I’m about to describe will pertain to all of these roles.

Keep in mind that not everyone is cut out for every aspect of the business. Some people are better at certain things than others. For example, I’m good at raising capital, and I was an OK asset manager, but I know I was less proficient at acquisitions, even though I was fine at note sales. You get my point.

So, here are some of the habits I’ve seen the most successful note investors have:

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The 8 Non-Negotiable Habits of a Successful Note Investor

1. They don’t take “no” for an answer.

Never give up. Or as we like to say, make sure you’re able to move in all directions at once.

For example, if a lien gets wiped and is now deemed unsecured, many note investors may give up on the deal at this point — whereas a persistent note investor may still explore other exit strategies, such as pursuing the borrower instead of the property, selling to a collections attorney, or selling it on an exchange platform.


2. They take real action.

You need to be able to make things happen. Also, it’s important to be more proactive than reactive.

For example, instead of a note investor waiting for a borrower to call in, they could already have an outreach program in place, such as a phone, mail, and legal campaign (preferably with a licensed servicer).

3. They hold themselves accountable.

Hold yourself accountable, and be responsible. It’s great to learn from the mistakes made by others, but it’s still OK to make some of them yourself as long as you learn from them and try not to repeat them.

One of the biggest mistakes we made when we first started out was that we didn’t do enough due diligence on our note seller, and we never got any of the collateral (in particular, our assignment). Because we couldn’t record the assignment, we were unable to start the foreclosure process, and the senior lien holder foreclosed ahead of us, which wiped our lien.

Related: The Investor’s Guide to Performing Due Diligence on Real Estate Notes

We learned from this experience, and now if we’re buying a large pool of assets, we usually request an exception report to verify that all of the collateral is there before we purchase.

4. They stay organized.

Be sure to keep good records. This is especially important with things like checking your data, performing due diligence, or measuring outcomes.

5. They think outside the box.

Creativity is critical when reworking non-performing loans, as well as when running a business.

Every borrower’s situation is different, and so whoever is communicating with them will need to get creative in finding a solution that fits all the parties involved.

When it comes to running a business, there’s almost an infinite number of situations that would require creativity. For example, for us, when the market was down and the assets we were trying to sell weren’t backed by as much equity, we created a warranty for our performing notes to protect the investor’s principal in the event of borrower default.


6. They realize they can’t do it alone.

Network and build relationships with others in the business. You can’t be afraid to ask for help.

Between networking and having mentors, many people helped me along the way. Even today, I still have a business coach who advises my partners and me on how to scale up our note business.

7. They know their numbers.

This one is kind of obvious, but you do need to know your numbers if you expect to survive in the space. It also gives others who are dealing with you a level of comfort and confidence.

8. They build rapport.

This may be one of the most important because we all have to deal with so many people, especially borrowers and vendors.

Related: What Investors Should Know About the Tax Implications of Investing in Notes

If you’re unable to build rapport, it will be more difficult for them to open up about any challenges their facing or for you to work with them to create a solution. So, if you’re not good on the phone, you may want to think about finding someone who is.

These are just a few of the habits and characteristics of a good note investor. Many of these are similar to real estate and lending when it comes to the knowledge base needed, but the one big differentiating skill with notes, especially non-performing notes, is on the collections side. It’s not hard or impossible to learn; it’s just a different business model when it comes to working with distressed borrowers.

So, what are some of the other habits or characteristics of a successful note investor that you can think of?

Leave your comments 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.


    • Dave Van Horn

      Hi Randy,

      Great question! There was never any one size fits all mentor I learned the business from, in fact far from it. When my partners and I started there were very few people even teaching the business, so much of what we learned has been cobbled together over the years from multiple different people and avenues. So over time we learned from our note sellers, other educators in the space, other hedge fund managers, vendors, our securities attorney, and we learned a ton from networking with other note buyers.

      I touched on it a bit in the article, but it’s important to remember that running a note business is still a business, so we also have a business coach to help out with that as well. To answer your question, we really learn by doing and this learning process hasn’t stopped yet!


  1. Patrick Desjardins

    “such as pursuing the borrower instead of the property”

    Hey Dave, can you expand on this? Since they get wiped in BK doesn’t it make it so you can’t go after them (unless they fall out of the plan)? I have some stripped liens that I don’t really know what to do with.

    • Dave Van Horn

      Hi Patrick,

      Sure thing. The answer is it depends. If the borrower successfully completes a chapter 7 Bankruptcy, you cannot pursue them personally. But in a Chapter 13 Bankruptcy you can pursue the borrower, unless there is an order to strip the lien AND they successfully complete the plan. If they are dismissed from either one, it’s as if the Bankruptcy never happened and you CAN pursue them personally.

      Hope this answer helps.


  2. Hi Dave,
    I appreciated your article and I like how you break down and simplify note buying concepts. I my limited experience purchasing a NPL that I rehabbed and continue to rent (with property management in place) there are areas of the business that can be confusing. I continue my excellent education journey but I enjoyed your recaps of the ups and downs of the note buying business.

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