Have you thought about investing in mortgage notes? Perhaps you may not know what a mortgage note is. If you’re looking for a new type of investment that requires very little work on your end, mortgage notes may be just the ticket. Let’s take a look at some details and how you can  best invest in mortgage notes.


What Is a Mortgage Note?

When you purchase a property, you’ll sign a number of documents at closing, including the mortgage note. It’s a special promissory note that is essentially a legal “I owe you” document to your lender. By signing it, you acknowledge that you owe the lender the money used to purchase the property and that you promise to pay it back.

While you’ll likely sign a promissory note for any loan, a mortgage note is a little different from the note you’d sign when buying a car or getting a consolidation loan. A mortgage note is considered a legal contract, and unlike other types of promissory notes, it’s also filed with a local government office. The lender holds a lien on the property you purchased, and they can take you to court and foreclose on that property if you do not meet all of the requirements of the mortgage note (i.e., if you don’t pay your mortgage each month).

A mortgage note includes all of the information regarding the loan, including its amount, the interest rate, the length of the loan, when the monthly payment is due, how late fees will be assessed, and other pertinent information.

Investing in Mortgage Notes

What many people don’t realize is that you can actually invest in mortgage notes. This is an easy way of adding to your investment portfolio. In fact, it’s actually easier than a lot of other types of investments because it’s a passive investment. This means once you purchase the mortgage note, you don’t have to do anything else. It generates income on its own. There’s no property to flip, renters to manage, or any other work to do.  Ryan’s Buying does all the work for you, which is why people use another term for note investing, which is passive investing.

This is because you’re not actually buying the property at all. Instead, you’re buying the mortgage note, which essentially means you’re paying off the current loan and now require the borrower to repay you. Now you receive the monthly mortgage payments instead of the original lender.

To get started, you may need to find a mortgage note broker. These professionals purchase mortgage notes, often for much less than their actual value, and then either resell them or add them to their own portfolio of investments. You can also purchase notes from individual sellers who may need to liquidate some of their finances. Whether it’s from an individual or an investment company, you will find there are a number of mortgage notes for sale. At times, even banks and other lenders sell off some of their mortgage notes in order to have the capital to invest elsewhere.

Working with a mortgage note broker is often the easiest way of making these investments, at least in the beginning. These experts can guide you through the process and teach you what to look for in a good note investment. It’s a good way of getting into this type of investment while still having someone there to answer all of your questions. Give Ryan’s Buying a call so we can let you know what our current investment note offerings are!

The Benefits of a Mortgage Note Over a Rental Property

Because you’re not actually buying the property, you’re not responsible for any of the maintenance, repairs, or upkeep on that property. You’re not acting as a landlord in any way. However, you do still collect the monthly mortgage payment, so you still generate that passive income every month. Essentially, you’re buying this revenue stream. Instead of a landlord collecting rent, though, you’re essentially the bank collecting on a loan.  What would you do with an extra $700 a month, call Ryan’s Buying to discover how to collect your check in the mail!

Of course, there is always the risk of the borrower defaulting on the loan. With renters, when this occurs, you have to go through the eviction process. In the end, you’re likely to simply lose several months’ worth of rent plus the cost of renovating the property if your evicted renters did any damage to it before leaving. With a mortgage note, if your borrowers do default, you can foreclose on the property. This means you don’t lose anything—you now own the property and can resell it, rent it, or do anything else you want. You have that added security you don’t get with other types of investments.

It’s Not a Get-Rich-Quick Scheme, But it is a Solid Investment

You’re not going to get rich right away after buying a few mortgage notes, but you will start seeing a return on your investment immediately. Mortgage notes are perfect for those who want a steady monthly revenue stream, but don’t want the responsibilities that come with being a landlord or the risk that comes with stocks. Investing in mortgage notes also often doesn’t require a huge amount of start-up capital, either, although that does depend on your location. Overall, investing in mortgage notes is a great way of diversifying your portfolio while also securing a steady revenue stream with little risk.  There are so many statistics that indicates real estate is the best form of investment.  Call Ryan’s Buying to find out how to use your self directed IRA to earn more money for your retirement.  Unfortunately, an IRA account will not make you 7-10% return on your investment, call Ryan’s Buying to learn more!