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Commercial Real Estate Note Investment: A Guide

realestate note investing

Real estate does not only include homes and housing complexes. It also consists of commercial spaces. If you have heard about real estate notes, then you must have heard about the commercial ones.

What do you mean by Commercial Notes?

Commercial notes are loan notes issued by the authority against a loan or a mortgage. These loans are issued to organizations and small businesses, not some homeowners.

What are the types of Commercial Notes?

It’s similar to that of the residential ones, performing and non-performing. Non-performing notes are the ones that are unable to collect payment for more than 3 months. Non-performing notes are sometimes called distressed ones.

Aside from that, you may across these terms:

Multifamily loan notes: Issued to building owners planning to use it for mixed purposes (commercial/ residential). Usually, these buildings have more than five grounds. If you are asking for a loan, the note you will get is a multifamily one.

Construction loan notes: Issued for ensuring commercial development of complexes, irrespective of the type.

Commercial property loan notes: These come in different sub-categories, owner-occupied, and non-owner occupied. Owner-occupied means loan against a property that is being used for commercial purposes. These are issued against small offices, churches, and retail stores. 

Non-owner-occupied properties include shopping complexes, among others.

Non-mortgage commercial notes: You can understand what it entails right? It consists of secured, and unsecured loans.

Unsecured loans: These loans are issued without any security. An example of this would be, line of credit.

Secured loan notes are just the opposite.

Reasons for Investing in these notes


  • It is the best way to generate passive income. It offers better returns (stable ones), you will get regular patterns, and you can see why this is the perfect choice for you.
  • It offers security, as it is secured by a real estate unit.
  • If you are not into taking risks, then this is the best choice in this department.
  • Allows you to recover your investment.
  • Of course, it is a commercial note, so the returns are higher.
  • Management costs will be low in this case


  • Although not traditionally considered the best option, it can offer various opportunities.
  • If you can make some adjustments to the note, it can turn into a performing one. 
  • Or you can plan to seize the property from the owner himself.
  • Non-performing notes are available at discounted rates at different exchanges.
  • Comes with different backup plans.
  • Loan providers can gain higher returns if they strategize correctly.
  • Speedy recovery

What are the problems associated with investing in these notes?


  • The amount can reduce due to property management costs
  • It can suddenly become non-performing.
  • If not properly constructed, investors may not correctly evaluate the value, which can result in losses. As commercial notes are valued highly, the loss margin can be significantly high.


  • Liabilities (environmental, financial, and more)
  • Chances of bankruptcy, and dealing with it can be expensive, and time-consuming.
  • Keeping up with market changes and complying with them

I think you now understand how important it is to understand these points to study real estate notes investing.

But this is just the fundamentals, it’s best for people who just want to learn about it. But, if they want to start as an investor, then this information will not cut it.

They must know how to buy and sell real estate notes, first. For example, where to look for, how to source them, and win them at discounted prices (if possible).

So we will discuss just that. You can go three ways for this purpose.

First, you can directly communicate with a note seller. You can look for a credible seller, reach out to him, discuss the term, prices, and if both parties agree, you can buy the note.

It works best for properties with low values. Now, why would anyone sell these notes? It’s good for taxes, as it does not cause any implication for both sellers and buyers.

The seller can gain additional revenues, by charging interests from the buyer.

How do I get in touch with them?

Nowadays, the best place to look for these notes is online. Craigslist is one website you can try, but there are other options. 

The second option is to buy from banks. Going this route offers you a variety and a wide range of possibilities. All you have to do is to check which banks are selling these notes and decide the best one for you. Once done, you will make some notes, and offer something they cannot refuse.

Special services: These are organizations that particularly work in this sector. They source these notes and facilitate the selling/ purchasing, thus making the lives of investors much easier. 

Not many people are interested in investing in commercial notes, due to bigger risks, and complications. However, if done right, it can be quite simple.

It’s necessary to go through all the information available online. It’s important to dig deep through them and gather useful information from there. Start from the very beginning, and gradually make your way up there. As it is a vast subject, you cannot expect to understand all the terms in a month or two, that would be unreasonable. 

An excellent way of studying would be trying hands-on material to gather practical experience. Going through the case studies also helps.

Note Conference is a place where you can get all of that in a concise script. You can see the topics covered there, and go through them to gain first-hand knowledge on this subject.

Not all online resources are created equally. Some just give a bird’s-eye view, while others might delve too deep that new investors might get lost.

Also, not all of them offer relevant experience and knowledge. Note Conference is different from them in all these aspects.

If you see something that’s not been covered yet, you can tell us. We will try to cover that in the next session. Have a great weekend ahead, bye.  

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