Been doing a ton of research but haven't really found anything with hard numbers. Why is Note investing the jam? Give me some math to work with. Sh&t link me to some math/note articles. Is note investing worthwhile for someone looking to pick up some cash on the side? I love my job and the best part is I have 20 hours to put towards making some bread on the side. Is note investing a better option than finding some solid investment properties?

"Better" depends on the person doing it. Do you want an investment, or a business?

• As a performing Note Investor I get 7-10%+ returns, with almost zero effort.
• As a Rental investor I get 8-12%+ returns with some effort.

Anything else is a business, and your results will vary wildly. 

As as a note investor you are buying paper to receive a cash flow stream.  As a landlord you own the property and have to deal with taxes, insurance, tenants termites and toilets to get to that cash flow stream. 

I prefer that my borrowers deal with the property and just send me the cash!

Check out this video of these guys walking through the numbers.  I don't know them, but it's a good example.  They have other similar videos posted as well.  

https://www.youtube.com/watch?v=skfTtkLtDbY

Yeah, Doug does a pretty good presentation, although its agenda is to attract investors in his projects. 

Thank you for the reply's.

Ok let me try some numbers on a performing Note from the youtube video linked above.

P&I=$880.89  Owes=$156,357 Purchase=$65,000 Worth=$115,000  20 years left on loan

If I buy this for $65000 and hold for 20 years without issue I would collect, 12 montsh * 20 years * $880.89~ $211,000

So 65K becomes 211K in 20 years. That is a 6% annual return about. Am I missing something? 

@Noel R. I'm not sure where you're getting 6% from, but 240 months of a $880.89 payment at a $65,000 purchase price will give you approximately a 15.5% return.

@Noel R. There are all sorts of ways to make money with notes but the main strategies are:
1. Note Referrals - Find and refer notes to investors and make a fee (usually 3-6% of the amount invested). I look at this as income rather than investing.

2. Note Investing - Invest in notes as a passive investor (8-12% average returns) 

3. Note Rehabbing - Buy notes and work to enhance the return (incentivize early payoff, take non-performing to re-performing, cure paperwork deficiencies, hardest hit funds, etc) for higher returns.
4. Create Your Own Note - Combine real estate investing with seller financed notes.
5. Buy Full and Sell Partial - Keep some or all of the payments on the back-end for future cash flow. Here is one of my favorites (with lots of numbers).

We were approached with a well-seasoned note secured by five retail strip mall type commercial units. The units had been purchased by a religious organization to use as meeting facilities. The particulars looked like this:
• Sale Price: $135,000
• Down Payment: $10,000
• Original Balance: $125,000
• Terms: 10% interest payable in 360 payments of $1,096.96 per month
• Remaining Balance: $121,248.52
• Remaining Term: 306 months

We negotiated to pay $92,804 for the full purchase of the remaining 306 monthly payments. We took a full assignment and purchased the entire note payment stream from the seller.

We then negotiated to sell a partial of 186 monthly payments for a purchase price of $95,046. We realized an immediate profit of $2,242 on the sale of the note AND retained the right to receive 120 monthly payments of $1,096.96 each commencing in 15 ½ years.
To recap:
• Payments bought: 306
• Payments sold: 186
• Payments retained: 120

Money was made at closing but even better, we retained the rights to a future residual income stream totaling over $130,000 ($1,096 x 120).

Fast forward 12 years and the note paid off early. Instead of getting the monthly payment we received a surprise payoff check of $57,569.28.

Originally posted by @Elio Campiolo Jr :

@Noel R. I'm not sure where you're getting 6% from, but 240 months of a $880.89 payment at a $65,000 purchase price will give you approximately a 15.5% return.

Help me with some math. If we take P&I and multiply by 12 payments then divide that number by our investment we will get yearly ROI? Which is about 16%?

where do you purchase notes?

you need collateral right?

Originally posted by @Noel R. :

Originally posted by @Elio Campiolo Jr:

@Noel R. I'm not sure where you're getting 6% from, but 240 months of a $880.89 payment at a $65,000 purchase price will give you approximately a 15.5% return.

Help me with some math. If we take P&I and multiply by 12 payments then divide that number by our investment we will get yearly ROI? Which is about 16%?

 Essentially, yes

@Noel R.

As a note investor you should be prepared to deal with any note that's nonperforming. If you buy one that is already nonperforming you should be able to follow through with restructuring, foreclosing, ect. And if it was already performing and all of a sudden stop, you might even consider having to dump it.

Originally posted by @Noel R. :

Originally posted by @Elio Campiolo Jr:

@Noel R. I'm not sure where you're getting 6% from, but 240 months of a $880.89 payment at a $65,000 purchase price will give you approximately a 15.5% return.

Help me with some math. If we take P&I and multiply by 12 payments then divide that number by our investment we will get yearly ROI? Which is about 16%?

 I get the same yield or return as Elio using a Time Value of Money Calculation.  Here are the keystrokes on an HP12C (or you could use software like TValue Amortization):

240 N

880.89 PMT

65000 CHS PV

I - Solve for I which equals 1.29 (monthly)

Then x 12 to get 15.52%

Originally posted by @Noel R. :

Originally posted by @Elio Campiolo Jr:

@Noel R. I'm not sure where you're getting 6% from, but 240 months of a $880.89 payment at a $65,000 purchase price will give you approximately a 15.5% return.

Help me with some math. If we take P&I and multiply by 12 payments then divide that number by our investment we will get yearly ROI? Which is about 16%?

 I like using Excel and I use the "Net Present Value" function to solve these types of "problems". You can also use a financial calculator, as Tracy mentioned above, that's probably a quicker method.

When looking at performing notes you need to calculate the IRR and not the ROI for your return. An example is if a note had 3 years remaining that was paying 4,000 year but you paid $10k for it, your ROI is 40% but your overall return (interest rate you paid yourself which is IRR) is much lower.

Where to find notes - you can find them everywhere but the low hanging fruit you will pay retail and have lower returns. You need to build relationships which doesn’t happen overnight and get to know who the players are and network.

There are many aspects of notes that different people invest in whether it be 1sts, 2nd’s, performing, non-performing, partials etc. there is not right or wrong type each person has their own business plan and reasons for why they invest in what they invest in

@Noel R.  Here is some math for you.

If you want a side hustle with little effort you can buy 5 year notes, 20k balance, at 10% yield with the following profile.  the below table shows growth over time if you start with two 60 month notes at 10% in reinvest the proceeds.  Feel free to PM me if you want the actual spreadsheet but it is basically jot compounding interest, the 8th wonder of the world.

Originally posted by @Chris Seveney :

Where to find notes - you can find them everywhere but the low hanging fruit you will pay retail and have lower returns. You need to build relationships which doesn’t happen overnight and get to know who the players are and network.

 I fully agree with Chris-- relationship building is the big key. That's how you get multiple referrals per year from your good referral sources.

Originally posted by @Brandon Johnson :

@Noel R.

As a note investor you should be prepared to deal with any note that's nonperforming. If you buy one that is already nonperforming you should be able to follow through with restructuring, foreclosing, ect. And if it was already performing and all of a sudden stop, you might even consider having to dump it.

 Excellent, Brandon. When I read the original post, the first thing I thought about was what the foreclosure process is in that state. Seems to me that's a significant part of the decision calculus.

Originally posted by @Noel R. :

Been doing a ton of research but haven't really found anything with hard numbers. Why is Note investing the jam? Give me some math to work with. Sh&t link me to some math/note articles. Is note investing worthwhile for someone looking to pick up some cash on the side? I love my job and the best part is I have 20 hours to put towards making some bread on the side. Is note investing a better option than finding some solid investment properties?

Interesting choice of phraseology here, "the jam". Never heard it before, I looked it up, still not sure what you mean by that. At any rate, there's nothing new or 'trendy" about note investing. In fact, it's as old as the hills, albeit a lsub-specialty that certainly isn't as widely known as mainstream REI. For my part, I fully concur with Bob M in that I prefer NOT to deal with "tenants and toilets" , so I love dealing with notes. It fits my busy lifestyle to a tee.

Also, through the years, I've picked up quite a number of techniques/approaches to making creative offers on notes, and as a result have increased my acceptance rate considerably. I did post a few of them awhile back:

https://www.biggerpockets.com/blogs/7809/48236-dis...

Originally posted by @Stan Hill :

Originally posted by @Brandon Johnson:

@Noel R.

As a note investor you should be prepared to deal with any note that's nonperforming. If you buy one that is already nonperforming you should be able to follow through with restructuring, foreclosing, ect. And if it was already performing and all of a sudden stop, you might even consider having to dump it.

 Excellent, Brandon. When I read the original post, the first thing I thought about was what the foreclosure process is in that state. Seems to me that's a significant part of the decision calculus.

 Absolutely Stan, in judicial states the FC process is generally longer and more expensive. We typically knock $15K off the top of value as reserves for FC, legal, eviction and trash out/preservation costs. Our intention is to avoid FC when possible but always keep in our calculations as it is always a possibility.

Bob