Discounted Note Buying for Older Generation Retirement

5 Replies

Hey All,

I just wanted to reach out to some people in my local area of Northern California to see what are your thoughts on Note investing in California.

First off, after watching podcast 17 ( with Jeff Brown, I was inspired by they way he made investing for retirement sound. As a 23 year old, personally my plan is to get into rental properties (see my other forum for that), but I do have people very close to me that have struggled saving up for retirement and are currently around the age of 50-55 and only have about $100,000 saved up. The people I know in particular that are in this case are very hard working folks, and I know that thinking about how they are going to retire off of such a small amount makes them stress that much more... With this in mind, I wanted to try to reach out to others who have either been in this case or who have known or worked with others in this case and see if they wouldn't mind sharing some of their knowledge so that I may pass it on to those around me. As well, I was wondering if there is anyone on bigger pockets who knows of any great Wealth or Finance Advisors in the Sacramento - San Francisco Area who work with people in these situations. I would really appreciate it if I could pass that information on to those around me that could really use the advise and coaching.

Directly talking about notes, have any of you had success with buying discounted notes and turning a 20% ROI? Or is this facet of real estate beyond the scope of people just getting into the business who want a steady passive income?

Any advice on this topic would greatly help me to coach the people around me and if you do know people in the field, I may be able to help get them a little extra business!

Best Regards,
Shawn Azam

Hi @Syed-Shawn Azam ,

I've been working with my recently widowed mother to better organize her retirement assets. I understand what you mean. $100K is nothing to live off of, especially in parts of CA which can be very expensive. Have you looked into annuities at all? I'm not a financial advisor and certainly don't know everything about annuities, but they are one way of at least locking in the money you already have. You can invest a certain amount and the company will then annuitize your investment meaning they'll pay you a certain monthly amount for life (unless you specify ten years, twenty years, etc.) regardless of how long you live. The advantage is that you have at least some fixed income. Even if your friends, relatives, etc. live to be 100 they won't run out of principal like you can with an IRA.

As far as notes, that's something else I've been involved in for the past several years. I'll buy nonperforming note, work them out, and then either collect the payments or sell to another investor. It's possible to answer your question to have a 20% return, but I don't know anyone that would make that kind of guarantee (at least nobody I'd trust). It's also possible to make more or less, just as would be the case with any other type of investment. But I will say that like all investments experience does count for something and there's a greater risk associated with the things you may not know to look out for. Feel free to message me if I can be of further assistance.

Hi @Syed-Shawn Azam . I would strongly advise against investing in notes given your level of experience (it looks like your are pretty new to the space - please correct me if I am wrong). Unless you plan on buying performing assets with a long payment history, its not an area for a newbie - certainly not one who knows nothing about the notes space. As a result, generating and IRR of 20% is not realistic. Seasoned reperformers should give you a net cap rate of ~12%. But again, you need to know what you are doing

You can certainly generate impressive returns over time if you build a highly structured methodical system to find notes and add value to them in some way. Either as @Mark S. says - by converting non performers into performers or by some other method.

I don't believe this is something that a new investor should attempt. Put it this way, all things being equal, you are more likely to lose money than generate a 20% return on your early investments. Note investing is a highly specialized business. You really need to know what you are doing. Its a tough business to learn in under a year (and I mean really working on it every day).

You might find my other posts on the topic helpful. But please don't buy notes thinking you can figure out what to do with them later. You are often buying assets that others (who know what they are doing) have rejected and are looking for the greater fool.

We have been doing this for 4 years, have 1500 notes on the books and do nothing else all-day-every-day.....and we still make mistakes. 

Don't believe the hype!!

Its a great space - but learn it thoroughly before buying anything

good luck


@Syed-Shawn Azam

Most investment advisers required a minimum balance greater than $100K.  Best bet would probably be to look for a fee-only advisor or CPA to help the couple with budgeting, insurance, and setting their expectations for retirement.

Hi  @Syed-Shawn Azam , I've been buying non performing notes in our self directed IRA since 2012, doing a loan mod with the borrower and getting annualized ROI ranging from 16-35%. This is a very specialized niche that can produce great returns but you need to know all of the parameters of how to reposition distressed debt and develop good relationships with vendors and asset managers.

You may want to start with a re-performing note serviced with a licensed loan servicer, get to know the asset class and then attend some conferences to make relationships if this appeals to you. We ended up selling off our rentals and using the cash to buy more notes, since in our IRA we don't need the tax shelter that a rental provides, nor do we need the hassles that tenants can bring to the operation.


I have no experience buying notes but as an originator (HML) I can emphatically state returns of 16%+ per anum are easily achievable. I do believe CA has a cap on how many transactions one can do without a license. In Florida we don't have a cap. As long as we are lending our personal money in FL we can do 1 or 100. @Jay Hinrichs may know the cap in CA. If I remember correctly, he stated that in another post.

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