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The Fundamentals of Real Estate Note Investing: Start Today

real estate note

Do you think that real estate is the right investment option for you?

Congratulations, you are thinking in the right direction.

But before buying a mortgage note, you need to understand the terms associated with it.

So, we will discuss those terms today!

Performing notes

Against these notes, a borrower pays off the loan on time.

Non-performing notes

Against these notes, a borrower is not making regular payments for at least 90 days. Also known as NPN or NPL.

Modification

The changes that are made to a non-performing note to make it a performing note. Also known as a workout ( a bank department dealing with problematic loans is also known as a workout).

Note Sale

When a note investor plans to sell a mortgage note to another investor. 

Deed-in-lieu

When the borrower gives full control of the property to the lender.

Foreclosure

If an investor is not getting payments on time, even after modifying the note, and there’s no other option, then he can go for property foreclosure.

Read Also: What Mistakes to Avoid Before Buying Notes?

It’s a method of forcefully gaining control of the property from the borrower.

Accredited Investor

An investor whose net worth and annual income are compliant with the rules and regulations of the SEC (Securities and Exchange Commission).

They have the right to invest in properties that come in the high-risk zone. That means those properties are not regulated by the commission. 

Acquisition cost

The total price of the note, along with taxes, discounts (if any), and other costs associated with the purchase.

Cash for keys

Also known as deed-in-lieu, here, the borrower himself assigns control of the property to the lender, by vacating the premises. This is done to avoid foreclosure. Here, the borrower receives cash from the lender, as an incentive to do so.

In short, the lender is getting the keys in exchange for cash, hence, the term “cash for keys”.

Contract for Deed

In real estate notes investing, a contract for deed is a legal term used for a scenario in which the borrower directly pays the seller. The note remains with the lender until the loan is fully paid off.

Credit Bid

The amount a lender can bid during the foreclosure action and includes the full amount, plus, penalties and default interest.

Default Interest

The increased interest rate, applied by the lender on an existing loan, when the borrower cannot pay the loan at the previous interest rate.

Deed of Trust

Here, a neutral third party is responsible for holding on to the property for the time being (until the loan is paid in full).

Due Diligence

The technique, taken by investors to review the entire history of the borrower, along with associated risks of providing loans to them.

Note Broker

A person who helps both loan lenders and borrowers get the best deal. A note broker will tell a lender about the real estate notes available for sale.

Note Fund

A fund for passive note investors, made by passive note investors. Usually, this fund is crowd-funded.

Re-performing notes

The non-performing note begins performing after the modifications are called re-performing notes.

Tape

A spreadsheet, often used by investors to learn all the information about assets, and borrowers.

UPB (Unpaid Principal Balance)

The amount unpaid against a mortgage note is called a UPB.

These are some of the terms you should know before beginning to buy and sell Real estate notes.

But these are not the only ones.

For more information, you can check our website and blogs for training purposes. YouTube and podcasts can be helpful too.

You can try reading these books as well.

Yes, today, we are going to discuss some resources that can help you learn the basics, the intermediary, and the advanced topics.

  1. Real Estate Note Investing by Dave Van Horn

One of our best picks, this book tells readers about what they should or shouldn’t do while investing in real estate notes.

  1. The Art of Investing in Distressed Second Mortgages by Sherman Arnowitz

The author himself is an experienced investor and knows how to generate passive income from these notes. The book tells about how to source these notes, perform due diligence, negotiate deals, and get funding for the business.

  1. Bailout Riches by Bill Bartmann

A very witty book written on the subject, and written by a very experienced person. If you want to learn how to purchase notes from a bank or other financial institutions, then this is the best choice.

  1. Invest in Debt by Jimmy Napier

This book covers all topics related to both note investing and traditional real estate investment. Both beginners and veteran experts can refer to this book.

  1. Turning Distress into Success by Fuquan Bilal

The author is known for successfully managing both performing and non-performing notes. You can master the art too, by going through the topics listed here.

These are our top 5 picks, but you can go through other books as well.

Why would you want to try mortgage note investing?

  • It’s an ideal way of starting a second income source.
  • It’s easier and far safer than traditional real estate investing.
  • No need for property and tenant management
  • No costly investments, repairs, or anything

There’s no benefit of going in blind, you need to study the course.

What makes us different?

We, at Note Conference, provide on-demand training on real estate note investing. We have tons of articles to showcase our expertise on the subject.

Read Also: What Happens When a Borrower Dies? Learn Mortgage Note Investing

You can go through them sequentially, to gain a better understanding.

We tried our best to make these articles beginner-friendly, in terms of language, etc.

We have the testimonials of students and other clients regarding our relevancy, accuracy, and authenticity.

Several students have started investing in notes after completing our training. 

Some say that our blogs are equally informative as those videos. You decide which medium you would prefer.

We have been in the industry for quite some time, and have gathered a lot of experience.

We believe in sharing that experience with you, to make you a better investor.

Join us in the journey, and mark the beginning towards a very lucrative business career.

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