Real Estate Note Investing

9 Replies

Hello all

Was doing some real estate investing reading, and stumbled across some articles about real estate note investing. It sounds like it could be a great way to diversify a portfolio, but I'm still unsure how exactly how it works, and the articles I've read is flying over my head (maybe old age is finally getting to me haha). Does anyone have any real life experience with this, how does buying notes work, and what exactly would I need to do to buy a note (if I decided to get into it). Thanks in advance for any all replies. 

First off, there are some seminars and schools that promote note investing.  I think some of these groups provide mediocre advice.   Second, note buying was profitable during the downturn.  The available notes have decreased substantially.  Third, many note players are far larger than you - buying large pools of them.  For the individual investor, you will need to sift through and find a few opportunities.   Understand the legal proceedings to complete the foreclosure.  I can't state enough that this can be complicated.  For example, some properties come with municipal liens that are hard to quantify.  In some states, including my own, the foreclosure process takes a long time.

I see you are from Detroit.  There are plenty of opportunities in that city which is starting to rebound. Also, banks are more likely to write off loans in your city than other places.  Stick in your backyard, because you can figure out the real estate easier.

you have NPN and you have new origination performing notes..

new originations are readily available to you and are a great way to diversify.

NPN are work and can be quite complicated and risk factor is higher but returns if you get one to work is higher generally than new originations.

@Donald Delt - I recommend following  @Scott Carson to learn about non performing, 1st lien residential notes. You can find him everywhere...youtube, iTunes (Note Closers Show Podcast). I started a year ago and have been very successful in making money. I'm not some super star who had millions with a background in real estate. I'm just a guy who followed the right people and did what they said. I disagree with Brian up above. I buy one or two notes at a time as opposed to large pools of notes and have made great money (I guess that's all relative). I invest in a Self Directed IRA for me and for other investors. I also recommend reaching out to someone who does what you are looking to do. As @Jay Hinrichs mentioned, yes NPN are work. No question about that. One option to lessen the work would be to Joint Venture with someone already in the business.

Good luck to you!

Eric Hyde

@Donald Delt note investing is essentially being the bank. You don’t have to deal with tenants, toilets or termites on performing notes. Performing notes are great for cash flow where you can diversify and earn high single to low double digit returns.

Non performing notes are another animal. If your looking to learn how to invest and be a “note investor” then there are many great teachers out there. I learned from @Scott Carson - if your looking to just know more about them and be passive investor then there are numerous books out there including those by Scott, @Martin Saenz @Dave Van Horn and others. BP has a whole section on it that you can spend a month reading as well.

Originally posted by @Chris Seveney :

Donald Delt note investing is essentially being the bank. You don’t have to deal with tenants, toilets or termites on performing notes. Performing notes are great for cash flow where you can diversify and earn high single to low double digit returns.

Non performing notes are another animal. If your looking to learn how to invest and be a “note investor” then there are many great teachers out there. I learned from Scott Carson - if your looking to just know more about them and be passive investor then there are numerous books out there including those by Scott, Martin Saenz Dave Van Horn and others. BP has a whole section on it that you can spend a month reading as well.

Hey Chris, thanks for the shout out. I would just add that when I buy performing or re-performing, I run them through the same due diligence process as my NPN's. That keeps the saw sharp. Keep up the good work...I really enjoy reading your posts on the industry and all the points you make.

@Eric Hyde , @Chris Seveney and @Martin Saenz are dead on. Just as people can tell you investing in real estate is too hard don't do it people can and will (as you can see) tell you note investing is too hard, there's no market. It takes commitment and learning, but it's not rocket science and I find it less risky than say house flipping (I'm currently in one of each deal, the non-performing note is going far smoother). In fact, I don't think I've heard dedicated note investors say they can't find deals. I heard buy and hold people complain they can't find deals all the time. I guess I should let those stereotypes stand though, makes for less competition.

Originally posted by @Odie Ayaga :

@Eric Hyde , @Chris Seveney and @Martin Saenz are dead on. Just as people can tell you investing in real estate is too hard don't do it people can and will (as you can see) tell you note investing is too hard, there's no market. It takes commitment and learning, but it's not rocket science and I find it less risky than say house flipping (I'm currently in one of each deal, the non-performing note is going far smoother). In fact, I don't think I've heard dedicated note investors say they can't find deals. I heard buy and hold people complain they can't find deals all the time. I guess I should let those stereotypes stand though, makes for less competition.

Hey Odie, my friend. Good to hear from you. I'm in a very large 2nd NPN deal now that is in DD and I am seeing tapes here and there. They are not as frequent as it was in 2013 when I started, but I'm not conducting as much outreach as I did in 2013. The deals are there, they are just circulating through a smaller group of investors. If you are not seeing them, you are not doing what is necessary to breakthrough. Grew up in Jersey so I have to keep it real.

@Donald Delt The great thing is there are companies that can handle most everything for you. You invest with them in exchange for a return on your money. Talk to some off those companies (looks like at least one of them have commented on here) they'll be more than happy to tell you the process and answer your questions.

Thank you to everyone for all the feedback. I am definitely going to do some more reading on the topic, as well as get ready to take the next big step and find a home to purchase and flip

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