Oct. 27th, 2019

We created a short video that explains the basics of Real Estate Note Investing.  It’s a fun little video with whiteboard animations, music, and my not-so-lovely voice.  Hopefully, in the future we’ll have a more professional voice over.

Most investors are left completely confused by the Stock Market.  There are some crazy market swings that seem completely illogical that can negatively affect your portfolio.  You really have very little influence over the market no matter how much research you perform.  On top of that most financial advisors are very narrow minded and won’t consistently do well with your money.  Even if their professional performance is lacking, they still get paid commissions by you.

If that wasn’t bad enough the current Real Estate Market has become very tough.  With high prices and hot bidding action, their isn’t enough juice for an investor to squeeze.  Chasing yield and long-term appreciation has become a game of Hot Potato.

I believe most people will need to focus on alternative investments if they are going to have the type of performance that they are looking for.  I strongly believe that we, as people, should emulate the best performers throughout society.  In this case that means we should mimic banks since they consistently make money throughout history.

Now you as an individual won’t be able to go out and actually start a traditional brick and mortar bank.  But, you can become your own bank by investing like one.  We became our own bank by investing in Real Estate Notes.

If you’re not yet familiar, a Real Estate Note is a contract in the form of a promissory note.  It is secured by Real Estate and is basically an IOU in the form of a loan that has to be paid off for a property.  The note will have terms like the amount owed, duration, regular payments, interest rate and fees.

You start your bank by buying a loan.  Congrats you’re off to the races.  Just like a bank, you now need to collect monthly payments from the borrower to pay for their mortgage.  You’ll collect these payments until the note has been paid in full.  Once you’ve been paid off you’ll need to reinvest in another loan and the Loan Circle of Life starts all over again.

However, that’s not the only way to invest in notes. The previous scenario was an example of a performing note. It’s called a performing note because the borrower is paying and performing their part of the contract. What happens when the borrower doesn’t make their payments? This is called a nonperforming note and it offers a unique opportunity.

Banks will often sell nonperforming notes for a steep discount.  A discount soooooo deep that you’ll think it can’t be real.  Depending on the situation, they can be bought for roughly 25% to 40% of what is owed. I get it, you don’t believe me.  You’re thinking, “Why would banks sell nonperforming notes at such a big discount”? Most banks are too big and have too much red tape to handle these problems. They want to get these pesky Non-Performers off their books as quickly as possible.  This allows them to increase their reserves so they can then lend more money to new borrowers and that’s where we come in.

We buy these Non-Performing Notes at a huge discount and that provides us with the flexibility we need to make money and help borrowers.  We take the time and offer borrowers the white glove treatment so we can reach a positive resolution.  We can forgive some of the past accrued debt, set up a new payment plan, negotiate to get the deed back from the borrower, or approve a short sale so we get cashed out and the borrower moves on. Finally, if we have to, we can foreclose on the borrower if they’re unwilling to work with us.

So that’s it in a nutshell.  You’re buying a mortgage or another promissory note that’s secured by real estate. Here’s a quick summary of the reasons you should invest in Performing or Non-Performing notes. Performing notes offered good discount, and good yields. They’re secured by real estate. They offer monthly cash-flow. There’s no tenants, no termites, and no toilets. Non-Performing notes are acquired at an even higher discount. They usually have higher yields because they’re usually a little bit riskier. They are also secured by real estate. They offer great flexibility because you have such a huge discount. It’s definitely an impact investment. You’re having a positive impact on people’s lives and communities across the United States. There is also no tenants, no termites and no toilets.

If you’d like to learn more about note investing or what we do, please text the word TOTES to 72000 or you can also reach me at my email, paul@totesofnotes.com.