Ep 273: An Introduction to Note Investing with Dave Van Horn

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Ep 273: An Introduction to Note Investing with Dave Van Horn

Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

Most people understand the world of rental properties, house flips, and other common real estate investments. But there is one little-known niche that could provide massive cash flow and profits without the headaches: note investing. In this episode of the BiggerPockets Podcast, we sit down with Dave Van Horn, author of Real Estate Note Investing, to talk about how anyone can get started with real estate note investing—even as a first investor. In addition to a great conversation about notes, you’ll also hear some of Dave’s powerful strategies for getting his real estate offers accepted, how he started his investments using the BRRRR strategy (with credit cards!) and much, much more.

Listen here or on your favorite podcast app.

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BiggerPockets
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Dave Van HornPro Member
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
8y

@Account Closed These mortgage notes have since been modified after they've gone into default and because of this default they're purchased by a company like mine at a discount - usually in bulk. So it's important to remember we're buying it for less than what's owed (a percentage of Unpaid Principal Balance or Fair Market Value).

Then we're re-modifying these loans with a new payment plan that can include not only the principal payment but also interest, arrears (missed payments), and any corporate advances (like HOA fees, back taxes, etc). So now this asset has an exponentially higher return than the original interest rate on the note.

We then sell the note at a current market rate that's acceptable to investors (which is the "8% to 10%" you're talking about) and price it accordingly.

Podcast Guest on Show #273
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  • Account Closed
    Henderson, NV · Member since 2017 · 26 posts · 10 votes
    8y
    Why would a not pay out at 8-10% when my mortgage is at 4% interest? Mindy Jensen any insight on this? I just listened to the pod cast. Really enjoyed it!
    3Reply
  • Mark Hughes
    Rental Property Investor · Aurora, CO · Member since 2018 · 288 posts · 117 votes
    8y
    Enjoyed this podcast. A lot of it went over my head but seemed super interesting!!
    1Reply
  • Mindy JensenPro Member
    OP
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    8y

    @Account Closed here to see if he can answer your question.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    2Reply
  • Matt Gar
    Albuquerque, NM · Member since 2018 · 25 posts · 10 votes
    8y

    I really enjoyed this podcast.  Is there a note thread somewhere?  I'd be interested in learning more about purchasing notes and also the process of doing so.

    1Reply
  • Marvin Ong
    Phoenix, AZ · Member since 2018 · 35 posts · 15 votes
    8y
    Mind blown... poof
    1Reply
  • Benjamin Kolmer
    Bury St Edmunds, Suffolk · Member since 2018 · 3 posts · 2 votes
    8y
    Thank you Dave for such an inspiring and enlightening discussion. My interest is absolutely piqued, can’t wait to read the book!
    1Reply
  • Dave Van HornPro Member
    Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
    8y

    @Account Closed These mortgage notes have since been modified after they've gone into default and because of this default they're purchased by a company like mine at a discount - usually in bulk. So it's important to remember we're buying it for less than what's owed (a percentage of Unpaid Principal Balance or Fair Market Value).

    Then we're re-modifying these loans with a new payment plan that can include not only the principal payment but also interest, arrears (missed payments), and any corporate advances (like HOA fees, back taxes, etc). So now this asset has an exponentially higher return than the original interest rate on the note.

    We then sell the note at a current market rate that's acceptable to investors (which is the "8% to 10%" you're talking about) and price it accordingly.

    Podcast Guest on Show #273
    13Reply
  • Account Closed
    Henderson, NV · Member since 2017 · 26 posts · 10 votes
    8y

    @Dave Van Horn thanks for the response, I am going to be ordering your book to get some more details. Particularly when it comes to using notes to pay off mortgages and paying for college!

    3Reply
  • Stanley E.
    Rental Property Investor · North Little Rock, AR · Member since 2014 · 148 posts · 43 votes
    8y
    I also found this podcast very interesting. I don’t think they sell notes here in Arkansas like this. If I am incorrect, please someone correct me.
    1Reply
  • Dana Asilum
    Omaha, NE · Member since 2017 · 11 posts · 6 votes
    8y

    Really interesting podcast this week, want to learn more about note investing! Will read more about it, very well explained by Dave. I really like it!

    1Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    8y
    Dave is the real deal! Not only is he a note expert, he is very knowledgable in many areas related to real estate and is co-chair for an accredited investors mastermind. He is also a philanthropist. We are glad he is local and humble enough to interact with schlubs like me.
    3Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    8y

    Really always wanted to learn about note investing. Can't wait to hear this episode!

    1Reply
  • Josane Cumandala
    Appraiser · Brooklyn, NY · Member since 2018 · 106 posts · 118 votes
    8y

    Had the pleasure of seeing Dave speak at my local BP meetup! Definitely take notes on this episode ;) 

    3Reply
  • Aziz Raji
    Real Estate Agent · Chicago, IL · Member since 2017 · 715 posts · 138 votes
    8y
    Great episode!
    1Reply
  • Sebby Gabre Madhin
    Investor · Mount Dora, FL · Member since 2015 · 92 posts · 44 votes
    8y
    I’m just beginning to explore the concept of notes investing (tired landlord after only 3 years, so doubt I’ll be in that aspect of RE much longer! LOL)—and I really loved your podcast. TONS of great information, but especially loved the idea of notes investing as not only profitable, but also an ethical endeavor—Actually going into it with the goal of keeping people in their homes by dealing with them compassionately rather than going into it with the goal of foreclosing. Just great.
    5Reply
  • Erik Perks
    Herrin, IL · Member since 2016 · 51 posts · 15 votes
    8y
    I bought the book before listening to the podcast and now I am even more excited. Time to watch the bonus content.
    3Reply
  • Julio Fernandez
    Hialeah, FL · Member since 2018 · 23 posts · 3 votes
    8y
    This was a great podcast. Eye opening of the possibilities this can bring. I want to learn more.
    1Reply
  • Anna L.
    Investor · Philadelphia, PA · Member since 2016 · 73 posts · 43 votes
    8y
    Dave Van Horn , when comparing SFR to a Note, both generating 8%-10%, in 15 or 30 years one can have free and clear property that they can sell for what ever the market price is or just continue to rent mortgage free increasing their return, but with note you just get your return until it’s paid off or you sell it, is that correct?
    1Reply
  • Scott Matthew C.
    Real Estate Broker · MI · Member since 2014 · 594 posts · 183 votes
    8y
    Anna L. once the note is satisfied it’s done!
    2Reply
  • Dave Van HornPro Member
    Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
    8y

    @Anna L. That's correct! Even though they're both technically real estate, they're really different asset classes. I choose to work in both asset classes (among others) to not only diversify but to benefit from the advantages of notes and property. 

    Podcast Guest on Show #273
    1Reply
  • Account Closed
    Lender · Salisbury, MA · Member since 2018 · 27 posts · 10 votes
    8y
    Loved this podcast. Purchased the book too. Great information.
    1Reply
  • Giannina Biala
    Stamford, CT · Member since 2017 · 20 posts · 3 votes
    8y
    Really enjoyed this podcast! Can’t wait to read the book! Would like to use this asset class to diversify my portfolio.
    0Reply
  • Taj Hayden
    Maple Valley, WA · Member since 2017 · 45 posts · 12 votes
    8y
    Ditto @Erik Perks . I saw the blog post on Saturday and ordered it right away.
    0Reply
  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    8y

    I've invested in notes before.  This is a very different investment vehicle.   I'll talk about the risks from my experience.  First, you usually do not see the inside of the property.  Second, the court case (foreclosure) takes a long time in some markets.  Mine at least two years.  Third, the structure may not be insured.  Fourth, the real estate taxes accumulate.  Fifth, in some areas, municipal fines do not go away.  Sixth, the discounted note wave is over.  You'll hear there are lots of note opportunities, but it dried up to a fraction of what was out there between 2010-2013.   Seventh, factor in legal costs.  They get expensive if the homeowner "fights" their foreclosure.  I realize that some non-judicial states have quicker foreclosure periods.  I live in one of the slower states.

    There are lots of positives about note investing.  So don't let my list of risks discourage anyone.  Rather, educate yourselves.

    3Reply
  • Brandon Ingegneri
    Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
    8y
    Dave Van Horn I have to say, one of the better podcasts that BP has had. Very insightful, and I don’t think I’ve heard notes broken down like that before so that laymen understand the general scope without any previous or limited knowledge on the subject. Absolutely looking forward to your book. Great job.
    2Reply
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