Going about investing in Notes using SD 401(k)

10 Replies

Hi Community!

I'm just getting started with my SD 401(k) and my first plan of action is to invest in notes as a way to get my feet wet. My questions are: Where is a good place to look for notes (I don't even know)? When I write the check out of my SD 401(k), am I investing the money to an individual or what? Is there a typical investment period with notes and how long are they?

Thanks everyone!

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Yikes, looks like you're really starting from scratch. The last thing you should do right now is buy a note as it sounds like you have no clue what to do with them.

I'd recommend you seek out some of the newbie friendly conferences to get acquainted with the lingo, the vendors, the basics.

Most of them are junk but if you want to look at notes and get a feel for them, you can look up the exchanges such as FCI and Watermark.

@John Hodson

Investing in notes is a popular self-directed solo 401k investment. I invest about 20% of my portfolio in trust deeds. You may consider reaching out to some land developers and real-estate agents for list of borrowers. The company that you opened the self-directed solo 401k with should be able to provide guidance regarding how the investment should be titled, however, the 401k name and the trustee's name should be listed. The note terms depends on the solo 401k trustee and the borrower (what you both negotiate).

Originally posted by @Patrick Desjardins :

Yikes, looks like you're really starting from scratch. The last thing you should do right now is buy a note as it sounds like you have no clue what to do with them.

I'd recommend you seek out some of the newbie friendly conferences to get acquainted with the lingo, the vendors, the basics.

Most of them are junk but if you want to look at notes and get a feel for them, you can look up the exchanges such as FCI and Watermark.

Thanks Patrick. I am planning to take a class on notes and learn more about them. I looked up FCI and Watermark based on your recommendation. Okay, now I know I need to learn more because there is a lot of lingo to absorb. I appreciate the direction!

Originally posted by @Mark Nolan :

@John Hodson

Investing in notes is a popular self-directed solo 401k investment. I invest about 20% of my portfolio in trust deeds. You may consider reaching out to some land developers and real-estate agents for list of borrowers. The company that you opened the self-directed solo 401k with should be able to provide guidance regarding how the investment should be titled, however, the 401k name and the trustee's name should be listed. The note terms depends on the solo 401k trustee and the borrower (what you both negotiate).

Thanks Mark. I'll ask more questions to the agency I opened my solo 401k with and keep learning the basics before I jump in.

@John Hodson

I know that you are anxious to make your first investment, but you should slow down a little and start learning and building relationships. Then after you built some relationships you'll start seeing the opportunities. 

John, I have my own opinions/experience with FCI and Watermark and am happy to share privately, please feel free to connect with me. I also have some good resources for reasonably priced education that I'm happy to share. Personally I've invested in NPLs using my Roth self directed IRA using both trusts and a 'checkbook control' LLC and have seen over 30% annualized ROI.

Bob

Originally posted by @John Hodson :

Thanks Patrick. I am planning to take a class on notes and learn more about them. I looked up FCI and Watermark based on your recommendation. Okay, now I know I need to learn more because there is a lot of lingo to absorb. I appreciate the direction!

It's pretty cool that you have a positive attitude about it. I forgot to mention you should read Dave Van Horn's articles on BP and Scott Carson's videos on Vimeo or Youtube or wherever they are.

Those alone should give you a pretty good overview of the basics.

The reason I recommend going to newbie conferences isn't so much to learn but to meet the vendors who have booths there. You can pretty quickly build your list of resources and ask other active investors there for referrals.

@John Hodson

Welcome to BiggerPockets!

Note investing involves a little more than you might be thinking right now.  I like it from a passive investment perspective but it's not a simple as buying a note and sitting back.  There is a good deal of due diligence involved in the beginning.

Coincidentally, I just recorded a podcast interview today with a 10-year veteran note investor today.  I plan to have it live in the next couple of days.  It's a longer episode, but I strongly suggest listening to it so you understand what this investment vehicles is.

Look for "Passive Income Investing in Mortgage Notes" (Episode #012)

Do you have a Solo 401(k) set up already, or are you looking into it?

Originally posted by @Dmitriy Fomichenko :

@John Hodson

I know that you are anxious to make your first investment, but you should slow down a little and start learning and building relationships. Then after you built some relationships you'll start seeing the opportunities. 

 Thanks Dmitriy. Great advice. I am seeing the network help support that desire.

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