From Contractor to Note Investor – Anyone Else Made the Switch?

Question

Hi all,
I’ve been seeing more contractors and active real estate operators transition into note investing to generate passive income without being on the job site.

Has anyone here made that transition themselves? If so, what challenges or benefits did you notice compared to active real estate investing?

Chris Seveney · Answer

I went from working for a GC to a developer to a full time note inevstor and run a fund - happy to chat about it as many have tried it, some have been successful and some not so much

Dave Van Horn · Answer

I wrote a book for BiggerPockets detailing my journey from contractor to note fund manager. Started out as a contractor, became a fix & flipper on the side (slowly accumulating a buy & hold SFR portfolio), and then transitioned into notes from there.

When my company was buying 2nd mortgages, I'm not sure my background played as much of a role since we were really just buying the paper but with buying 1st mortgages and REO it really can make a difference with determining construction costs, having reputable "boots on the ground" from my previous life, etc. So that's the benefit.

When comparing notes to investing in traditional real estate, I'd say one of the biggest challenges is the note investing can be a more capital intensive business, requiring more money upfront with less creative strategies for an individual to buy (though you're always buying at a discount). Notes also don't appreciate like hard real estate can.

Every asset class usually has it's upsides and drawbacks. This is part of the reason why today my company buys both notes and commercial real estate.

Rick Pozos · Answer

Hey @Melinda Eilts I did not see anything on your profile, so I dont know where you are, but why cant you do both and all of the above??

Keep being a contractor, buy some notes with profits. Maybe buy some houses and owner finance them to the buyer after rehab. That creates notes. Buy for 100k, put in 50k and sell with owner financing for 200k at 8% for 30 years!!

From Contractor to Note Investor – Anyone Else Made the Switch?

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