My recent realization about notes
In the past year or so I have been increasingly interested in leveraging discounted notes to diversify my portfolio. I prefer 1st position notes but certainly understand how others like and do well with 2nds.
Initially the concept was very foreign and I often thought 'wait, so I am buying someone elses debt and playing the role of the bank?" Well, yeah, and now I am super comfortable with this notion.
The point of this post is not how I eventually became OK with the concept but rather a realization I had after many discussions with friends, family and colleagues and a recent event (more on that in a second)
What I noticed is that the most confused were people under 40 and in urban areas (I live in Los Angeles area). This concept was very foreign.
When I explained notes to people above 50 and/or in rural areas the concept of Private Financing/Seller Carry was crystal clear.
Then, 2 weekends ago, I was cleaning out my grandfathers house as he recently passed. I came across a box of old papers and went through them to make sure his SSN was not on anything. What I found was that the past 3 houses he sold (he moved his primary property as he migrated further west with his job) were all seller carry situations and he would by the next place with cash.
My grandpa (who passed in Jan at age 99) was not a real estate person at all, this was just the obvious way to sell property. He had been selling property this way his entire life and likely never thought a thing about it. I then realized why older and/or more rural people are used to this. It happens all the time and was the norm for farms and rural land for many years.
I am sure this point has been made somewhere before and probably in a book but it just dawned on me...this was the norm for hundreds of years before commercial banks were able to merge and grow and own 'everything' in the country
Anyways, nothing earth shattering here but thought I would pass along. When explaining notes to my wife just recently I was able to talk about my grandpas transactions and it seemed to immediately convert her thought from 'this is abstract' to 'ok, I get it, this has been done forever, forget the banks :)'