What is Notes Investing?

Uncategorized May 13, 2021

Wealth is not created by money, hard work, or luck, but is created by Financial Intelligence.

Investing in Notes is one of the passive incomes we can say that is stable and will help us in our way to financial freedom.

What is a NOTE?

A note is an IOU where you invest in debts. Essentially, a note (or promissory note as it's often called) is simply a promise to pay. Anytime you borrow money and create a document that says you will pay someone back, you create a note.

Personal Loans
Student Loans
Car loans
Credit card contracts
Business Loans
Treasury Notes
Mortgage Loans

So then, when you are a note holder, you are essentially acting as a bank or lender. The borrower agrees to pay you back over a certain length of time with a certain interest.

There are notes with collateral, and there are also notes that are non-collateral. This means:

Notes with collateral are asset-backed. This means that the lender can take the underlying asset (when we are talking about real estate notes, that means the property) as repayment for the debt.   


Non-Collateral or Non-Secured Notes are not secured by any physical assets. An example of this is credit cards.

 

Real Estate Note investors invest in the paper underlying a mortgage. When you're a note investor you become the bank. 

Generally, most note investors will be investing in non-performing notes (i.e., the homeowner has stopped paying on their mortgage). 

Why would anyone invest in that?  Because they’re able to get the note at a very steep discount (pennies on the dollar). 

There are multiple ways to profit from this type of investment and the best way is to help the homeowner begin to re-perform and stay in their homes.  It can be a very lucrative and win-win investment.

What are the Pros & Cons of Investing in Non-Performing Notes?

Pros:

-You’re able to get a loan for pennies on the dollar.  

-This can be a great opportunity to help home-owners in a way that’s win-win and lucrative

-You are the bank (not a landlord), so you don’t have to deal with the 3 Ts: tenants, toilets, and termites.

Cons

-You must do proper due diligence on this investment to make sure you have clear title or you could lose money.  With proper due diligence, it’s fairly low risk.

-You have to have the money to invest in the notes.  You can’t get a loan for these investments.

Note investing is a really interesting way to create streams of passive income or chunks of cash while helping out others. If you're interested in finding out more, comment below to be added to the invite list for our next Notes Investing Webinar.

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