In this video series, we're covering the basics of mortgage note investing.
* 0:00 Intro to Mortgage Note Investing * 0:41 Who is Rick Allen * 1:05 How we got into Mortgage Note Investing * 2:44 What is Note Investing * 5:28 Why do people invest in Mortgage Notes
Starting with this first episode, Rick Allen goes over the benefits of note investing and why you as an investor or real estate investor would find note investing a viable investment vehicle.
Real estate note investing is the process of buying peoples debt. You can purchase a mortgage note, which is the IOU and collect those monthly payments with varying interest rates from the borrower (person living in the house).
This is a great investment strategy for those looking to make passive income with monthly mortgage payments. Interest rates vary but it can go as high as 12% returns. The returns at this level are with "performing mortgage notes", this is when the person in the house is paying their mortgage successfully each month.
The difference ways to invest in mortgage notes is between performing and non performing notes. Performing notes are great way to start investing in notes. While non performing notes take a little bit more experience and added risk, granted you will get these notes at a discount.
People find non performing notes attractive if they're used to investing in real estate, you could buy the note, get the house back and standard types of real estate exit strategies. The best part is that you're buying the mortgage note and that pricing is not always tied to the real estate market.
Non performing real estate mortgage notes are a great addition to the current strategies you may use in your business. You could get the house back and turn it into a rental property or seller finance the house, you could fix and flip, etc. You have so many more options when you purchase the note.
Owning the mortgage note, you're essentially a small bank. You are who gets paid out from the mortgage payments. This is beneficial because an amortization schedule is front loaded with interest. So for the first number of years, it's mostly payments of the interest with little going to the principal. As time goes on that starts to level out and in the end of a mortgage most all goes to principal.
Being the bank also puts you in a unique position that a landlord does possess and that is not having to deal with issues with something goes wrong with the house.
As the note holder, you're not getting a phone call in the middle of the night about the leaking toilet. Those issues are on the homeowner and their insurance company.
Another benefit of being the note holder is that you have a lot of flexibility to work with the home owner. If they had problems paying the mortgage, you could setup a loan modification or restructure the loan. The good part here is that you can do the right thing and work with the person in the house and make a suitable deal to keep them in the house.
As the note holder, you also have a lot of security. As a scenario - the person in the house has equity, it's their family home, they take pride in their home - they will do whatever possible to save that home in a time of crisis. You as the note holder are able to work with them to help in that situation.
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By: Paperstac Title: Mortgage Note Investing Series: Video 1 of Getting Started (2022) Sourced From: www.youtube.com/watch?v=W1loej9CPS4
