Note Investing – Enter the Real Estate Game With Less Risk Pros v Cons

Note Investing.  Have you heard of it?

Note investing to educate real estate prospects

The 411 on Note Investing

Note investing is a thing.  That can be a good thing for you if you have the right knowledge at hand.  This post will educate you on the pros and cons of note investing.  Have you wanted to break into the real estate market?  Due to the strong interest in this market, funds, trusts, and other investment products that don’t require a huge initial investment are becoming more popular.


**Investing in several different financial products within the real estate market can limit your risks.**


Notes are an excellent addition to your portfolio. They are easy to purchase, do not require any management on your part, and are safer than other financial products connected to the real estate market.


Purchasing a note is the equivalent of owning a part of someone’s debt. In the context of real estate, buying a note means you own a portion of someone’s mortgage.


Traditionally, insurance companies and pension funds would buy large quantities of notes. However, this product is becoming a more common option for individual investors, thanks to lender’s clubs who specialize in connecting individual investors with future homeowners in need of financing.


Benefits of Note Investing

Note Investing Realtor



There are several advantages to adding notes to your portfolio:


  1. Notes are secured liens.

    The home is collateral for the loan. If the borrower is unable to make payments, the home is repossessed by the lender. The risks of losing your initial investment are low.  Can you see the advantage when compared to other real estate products?


  1. Earn a monthly income with notes.

    These investments typically pay out between 6% and 20%, depending on the interest rate of the mortgage you purchase a portion of. You can use this income to purchase more notes or choose to invest in other products to diversify your portfolio.

My Personal Side Note (No pun intended)

You may be wondering WHY should you listen to me or take any advice from the information you see on your screen.  Well, that is why I want to connect you to the human side of me and my family.

Note investingI have been in the real estate business for over 14 years, and my son, who is also my business partner, has over 12 years in the business as well.

In addition to that, my passion is to help people (almost to a fault).  I am very much at home cooking for a large number of people for no apparent reason.  Just as I am at home educating people on the process of real estate.  I like protecting my clients from beginning to end and making sure they are so happy with me, they end up becoming my friends/family members.


  1. Notes are easy to manage.

    You can buy or sell notes online through a lender’s club or investment service. Compared to managing a property, notes hardly require any time or effort.


  1. You can purchase discounted notes.

    This is a great way to get started with note investing!  All with a small budget to generate a profit quickly.  This technique involves purchasing notes at low prices and reselling them once they gain value.


  1. The value of a note goes up as the value of a property increases.

    You can choose to keep a note to earn a monthly income or decide to sell it for an immediate profit once the value of the property goes up.


Disadvantages of Note Investing

Note investing - the cons to note investing


There are also some downsides to note investing:


  1. Fees associated with note investing.

    Lender’s clubs or investment services charge their clients for each transaction performed. You can purchase notes for as low as $10 or $15.  Fees can go up depending on the service you use.  Fees can quickly add up if you buy and sell notes on a short-term basis.   

    Now if you are anything like me, you like things to be as simple as possible.  One thing I know about money is this.  I hate losing it.  I can’t stand it.  Not even for one minute.  You can ask my husband on this one.  There are two things related to money. (1) pay NSF fees. That stands for insufficient funds.  That is not fun when you barely have money in the bank.  You make a mistake and then the bank charges you even more money for making a mistake.  I understand that business is in business to make money but some banks are ridiculous about how they charge you every single day.  Some even charge you interest daily too.  But that is another story for another day. The one thing I will say about that before I get off my soapbox is I like parking my money with Credit Unions instead!  We LOVE MACU!  The other money vampire is (2) paying for speeding tickets.


  1. Notes are generally long-term investments. 

    Unless you can sell a note within a short time-frame.  (Let’s say because the property gained value).  Your best strategy is to keep a note for as long as the homeowner makes payments on their mortgage.  This means you can earn a monthly income.

    Here is where my disposition of holding for the long haul comes into play.  I am NOT a day-trader type of investor.  I rather prefer the simple laws of investing – time and compound interest.  That way, all I have to do is set it and forget it.  Time and compound interest take over and I don’t have to do any heavy lifting.



  1. Beware of notes for overvalued properties.

    Overvalued property is common in the real estate market. Since the value of a note is a direct reflection of the value of a property, some notes are sold for more than they are worth.

    Here is where having a caring real estate professional on your team can have a distinct advantage over those who choose to go it alone.  Having a stellar track record of taking care of our clients, I am confident in saying that having a team like ours is only going to place YOU in the best position to succeed in real estate and beyond.

In summary


In the end, adding some notes to your portfolio is a low-risk way to generate passive income for the long-term. Choose a reliable service to purchase your notes.  Learn more about the prices on the real estate market to avoid overpaying for these investment products.

You have just been educated on the pros and cons of note investing.  I did my best to give you both sides of the equation so you can place yourself in a position of an educated consumer.

If you found value in this post, please do contact me or my son (and business partner) Nick or leave me a comment or two on my website.  I would love to hear from you and learn what I can do to be of greater value and service to you.

I am here to serve.