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

37 Replies


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.

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!

Enjoyed this podcast. A lot of it went over my head but seemed super interesting!!

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.

Thank you Dave for such an inspiring and enlightening discussion. My interest is absolutely piqued, can’t wait to read the book!

@Anthony Melendrez 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.

@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!

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.

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!

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.

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

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

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.

I bought the book before listening to the podcast and now I am even more excited.

Time to watch the bonus content.

This was a great podcast. Eye opening of the possibilities this can bring. I want to learn more.

@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?

@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. 

Loved this podcast. Purchased the book too. Great information.

Really enjoyed this podcast! Can’t wait to read the book! Would like to use this asset class to diversify my portfolio.

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.

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