Notes For Sale: Navigating The Marketplace For Savvy Investors

Investing in notes is a great way to generate passive income without the hassle of owning physical property. Notes are a form of real estate investment where investors buy mortgage notes attached to a property, becoming the bank and receiving interest and principal payments instead of rental income. This allows investors to benefit from the advantages of real estate investing without the headaches of being a landlord.

There are two main types of notes: performing and non-performing. Performing notes are those where the borrower is current on their payments, while non-performing notes indicate that the borrower is in default on their loan. While investing in non-performing notes can be riskier and more complex, it can also offer significant profits through loan modification, reselling, or foreclosure.

Note investing provides several benefits, including higher returns compared to traditional low-yield bonds or stock dividends, and the ability to set your own return and determine your risk level. Additionally, it eliminates the need to pay real estate agents and provides the potential for a higher return on investment. However, there are also risks associated with note investing, such as the borrower defaulting on the loan and the potential for losing money if the property sells for less than the note cost.

Overall, note investing is a lucrative opportunity for investors seeking passive income and offers a unique way to invest in real estate without the traditional challenges of property management.

Online marketplaces

There are several online marketplaces where you can buy notes to invest in. These include:

• Note trading platforms: These are dedicated websites or exchanges that allow users to buy and sell mortgage notes and other types of notes. Examples include NotesDirect.com and Debexpert.com.
• Crowdfunding platforms: These platforms allow multiple investors to pool their money together to invest in various opportunities, including notes.
• Private lending programs: Some companies offer private lending programs where investors can purchase real estate notes directly from them. For example, Garnaco Group offers a private lending program where investors can buy performing notes that generate monthly income.
• Note investment funds: Investors can also choose to invest in note investment funds, where their money is pooled with other investors' money and managed by professional fund managers. This option provides a more passive approach to investing in notes.
• Hedge funds and note brokers: There are also hedge funds and note brokers that buy and sell notes online. However, it is important to be cautious when dealing with these entities, as they may sell inferior notes to the public while keeping the best notes for themselves.

When buying notes online, it is important to conduct thorough due diligence and be aware of potential scams or unscrupulous transactions. Reputable online marketplaces will have websites and positive reviews, while con artists may pressure you to sign agreements before providing an offer.

Note exchanges

Mortgage notes, also known as real estate lien notes, borrower's notes, or real estate notes, are a way of investing in real estate without owning physical property. When you buy a mortgage note, you become the bank, and instead of rental income, you receive interest and principal payments every month. The real estate acts as security for your investment.

There are two main types of mortgage notes: performing and non-performing. Performing notes are those where the borrower is current on their payments, while non-performing notes signal that the borrower is in default on their loan. Non-performing notes are typically sold at a significant discount and can offer investors the opportunity to modify the note through reselling it or foreclosing on it, potentially resulting in significant profits. However, this process is complex and time-consuming.

When investing in mortgage notes through note exchanges, it is important to be aware of the risks involved. These notes are not FDIC-insured, and the property securing the note may not be in good condition. Additionally, there is a risk of default by the borrower, and you may have to pay legal fees to foreclose on the property. It is recommended to do thorough research before investing in mortgage notes and to seek advice from a mortgage broker or investment advisor.

Note brokers

The role of a note broker is versatile and dynamic, requiring adaptability to changing market conditions. It is not a get-rich-quick scheme but a legitimate business that demands hard work and a deep understanding of the market and clients' needs. A successful note broker should possess diverse skills, including analytical thinking, negotiation, and consulting abilities.

To become a note broker, one must educate themselves about the industry, its players, and the different types of notes available. Marketing is a crucial aspect, as finding note holders is a significant time commitment. Note brokers should also be well-versed in pricing strategies and have access to institutional investors or private lenders to facilitate transactions.

Note brokerage can be a lucrative career, offering flexibility, the potential for high earnings, and the opportunity to build a solid network of clients and investors. However, it is important to approach it with dedication and a realistic understanding of the challenges involved.

Real estate investor groups

• Colorado Association of Real Estate Investors (CAREI)
• Colorado Springs Real Estate Investing Club
• Investment Communities of the Rockies (ICOR)
• Investors Realty Resource of Colorado (IRROC)
• Northern Colorado Real Estate Investor Group (NCREIG)
• TNS Loans Real Estate Investor Insiders
• Western Colorado Association of Real Estate Investors (wCAREI)

ICOR, in particular, is Colorado's only nationally recognized and award-winning REIA. It serves Denver Metro, Colorado Springs, Fort Collins, and Northern Colorado, as well as real estate and rental property investors across the state. ICOR's mission is to empower individuals looking to achieve their desired lifestyle through real estate investing by providing practical learning, networking, and advocacy.

For-sale-by-owner groups

When looking to buy notes from for-sale-by-owner groups, there are a few things to keep in mind. First, it is important to do your research and due diligence. This includes understanding the borrower's creditworthiness and the value and condition of the underlying property. It is also important to know your lien position, as you want to make sure that you are in a position to collect on the note if the borrower defaults.

Another thing to keep in mind is that investing in mortgage notes from for-sale-by-owner groups can be a risky business. These notes are often non-performing, which means that the borrower is behind on their payments. This can lead to the need to renegotiate the deal or foreclose on the property. It is important to have a plan for how to monetize the property if you do end up needing to foreclose.

Additionally, when buying notes from for-sale-by-owner groups, it is a good idea to use a mortgage broker or investment advisor. They can help you find the best options and navigate the risks involved in this type of investment.

Overall, for-sale-by-owner groups can be a great place to find notes to invest, but it is important to do your research and understand the risks involved. With the right approach, investing in mortgage notes can be a profitable and passive income stream.

Frequently asked questions