Real Estate Note Investing For Newbies

We’ve been there…desperate to learn about real estate note investing. Wondering, “how do you buy mortgage notes with no experience?” Completely lost about how to even begin to start. It can seem so overwhelming.

You don’t have to be a finance whiz to invest in notes. If you’ve found this page, you’re showing that you have motivation and a willingness to learn. That’s a great start!

But, it’s not as simple as just buying a note and hoping that it manages itself. There are a lot of steps along the way…from finding a note to closing on your first note deal.

Let’s discuss a few things you need to think about with real estate note investing.

Thinking About Note Investing?

7 Steps To Buying Your First Note

(1) Get a Lead Source

The note biz is all about getting leads. If you don’t have a note, you don’t have a deal.

Learn to develop a systematize way to find mortgage notes for sale. Whether through brokers, hedge funds, Google ads, or an online marketplace, find a consistent source of leads coming your way.

(2) Do Your Due Diligence

Due diligence just means way to screen the notes you buy. Now, this can be simple or extremely elaborate. Basically, you’ll want to determine if a specific note works for you. Does it meet your buying criteria? How much do you want to spend? Is the property located in an area where you want to do business? Is the borrower paying on time?

These questions are just a tip of the surface when it comes to performing due diligence on a note.

(3) Obtain Financing

Where to get the money to buy a note? You’re going to need capital to invest. You can use your funds to purchase notes. You can also take out a home equity line of credit (HELOC) to obtain needed cash to get a note.

As you become more advanced as an investor, it’s possible to work with others to fund your deals ie: joint ventures and private lending.

(4) Manage Your Asset

Buying a note is all about paper management. Once you get a note, you’ll have securely store information about the note, record it in the local jurisdiction, and also hire a note servicer to handle the day-to-day transactions regarding the note.

Once your note portfolio becomes large enough, you’ll definitely want to consider hiring someone ie: an asset manager, to keep track of your mortgage notes.

(5) Keep Your Books

Cashflow is everything! This is especially true when it comes to note investing. Bookkeeping is little discussed, however, it makes a huge difference in the profitability of your assets. A great bookkeeper and accounting software is essential in helping you stay on track of money flowing in and out of your business.

(6) Determine Your Exits

With notes, there are three basic outcomes: either the borrower pays off the note as promised, they pay off the note early, or they do not the note as agreed. Your exit strategies are based on what you want to accomplish with the note (ie: getting consistent cash flow or rehabbing a non-performing note to sell) and one of those three outcomes.

(7) Find A Mentor

We highly suggest that you find a mentor-someone experienced with notes to guide you through the inevitable problems that will occur. Note investing has a steep learning curve. It’s best to learn from others’ mistakes, than to create new mistakes of your own!

FAQs

Why Should I Start Investing in Real Estate Notes?

Investing in mortgage notes provides the opportunity to generate financial profits in real estate without the burden that comes with managing property. As is the case with any other type of investment, real estate note investing comes with risks. Therefore, prior to begin investing in real estate notes, it is important for one to continue his or her education, for the purpose of maximizing profits.

Is Buying Mortgage Notes A Good Investment?

Buying mortgage notes is a substantially profitable real estate investment. Investing in mortgage notes is the process of owning real estate in which the homeowner pays the investor as opposed to the bank. Investing in real estate notes can generate more profits than most stock dividends and traditional low-yield bonds from banks.

How Much Do You Need To Buy Mortgage Notes?

Having your own money will make it easier. However, not having your own money is not a barrier to entry. Many small groups of friends and local investors are pooling their capital. They may have the money and the desire to invest in notes. They may just not have the time, expertise, or connections to find good deals. Our company is always interested in partnering with other investors. If the deal is good, the money will follow.

How Do You Buy Notes With No Money?

Buying mortgage notes with no money down is a challenging task, but not impossible. One of the best options is to seek out private investors who may be interested in partnering with you to purchase the mortgage note.

I Want to Be a Note Broker. How Do I Get Trained?

Becoming a note broker is a great way to get started in the industry. Getting the right training is important if you want to be successful as a broker and to be taken seriously by note investors and funders.

Do You Offer Mortgage Note Investing Training?

Not right now. However, we’ve partnered with Note Investor University. They offer comprehensive, affordable training and mentorship on buying notes and starting a real estate note investing business. They even offer a mastermind group to network with other note investors.