Common Note Investing Misunderstandings

 

Myth: Note investing is risky and complex.

Truth: There are a few tricky things to understand, but that’s why I’m here. I’ll work with you to ensure you get it, and I will remain available to help along the way. All investments carry risk, but more often than not, note investing is much less risky than investing in actual real estate.

Myth: Before buying a note, you must know how to foreclose.

Truth: Understanding the basics of foreclosure laws in your state is a good idea, but since you’ll hire an attorney for foreclosure proceedings, you don’t need to be an expert.

Myth: You can always get non-performing notes for pennies on the dollar.

Truth: This isn’t always the case. Non-performing prices vary depending on the market, the property and the status of the note. Due diligence is necessary to determine whether you’re likely to get a good return.

Myth: Independent investors can’t purchase notes from banks.

Truth: Many performing notes are sold to the GSEs and Fannie Mae, but non-conforming, and non-performing loans are available to us.

FAQs

  • A Promissory Note is a written, legally enforceable agreement to pay you interest at a specific rate and frequency and repay your principal (the original amount that you invest) on a specific date. The owner of the mortgage note receives monthly mortgage payments, the payoff when a loan is refinanced or the property is sold, and who is entitled to take over the property through foreclosure if the borrower or owner doesn’t pay the note as agreed.

  • Currently, $25,000 is the minimum investment Nomad Note Investments is taking, but this is subject to change. Let’s talk.

  • Yes. This investment provides investors with a way to use self-directed traditional IRA or Roth IRA. We can recommend several custodian companies that handle the paperwork and hold your IRA while the funds are invested with us.

  • When there is collateral that you, as lender, can repossess in the event of default, that adds to your security. Therefore, it’s a secured note. An unsecured note has no collateral that you can repossess. This is riskier but also has higher interest rates. To collect on the debt in default would require pursuing the borrower in court.

  • Nomad Note Investments provides Investors with an IRS Form 1099 annually every January.

  • Everything we do is done in partnership. Let’s get together and talk about it.

  • That’s a good thing! This is an important decision. Get in touch and we’ll be happy to help with any questions you have.

Glossary

I’ve often felt that brokers, advisors and other financial people use confusing verbiage – a sort of insider language – to pull fast ones and make extra money off my perceived ignorance. That’s not me. I want you to understand all of this. So here are some terms you might here. Don’t hesitate to hesitate. Slow down the process, ask for clarification again and again – anytime you need it.

 

Accredited Investor

An entity or individual with annual income and a net worth that meets certain parameters set by the Securities and Exchange Commission (SEC).

The SEC defines an accredited investor as either: an individual with gross income exceeding $200,000 in each of the two most recent years or joint income with a spouse or partner exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

 

Credit Bid

The bid that the lender makes at a foreclosure auction, which in most states can be up to the full amount owed to the lender including fees, penalties, and default interest.

 

Note Broker

That’s me. The person connecting you, the investor, with mortgage notes that are for sale. I source and purchase, perform due diligence and manage the accounts

 

Rehab

The process of turning a non-performing note (NPN/NPL) into a performing one.

Acquisition Costs

The total price of purchasing an asset purchase (not including taxes) after factoring in overhead expenses, discounts and other costs.

 

Default Interest

When a loan is not paid according to terms, the interest rate increases to the “default interest” level.

 

Performing Note

A note which is currently being paid according to its terms. 

 

Tape

An industry term for a list of assets.

Cash for Keys

A foreclosure alternative to encourage a borrower to vacate a property in exchange for its deed. You can include cash incentives to expedite the process, hence “cash for keys” (actually the deed).

 

Deed of Trust

A legal instrument which is used to create a security interest in real property wherein legal title in real property is transferred to a trustee, which holds it as security for a loan between a borrower and lender.

 

Non-Performing Note (NPN/NPL)

A note not being paid according to its terms, and usually 90 or more days past due.

 

Unpaid Principal Balance (UPB)

The face value remaining on a loan.

Contract for Deed

A legal agreement for a property purchase in which a buyer takes possession of the property. The seller receives payments from the buyer and holds the title until the buyer pays the purchase price in full.

 

Due Diligence

The in-depth research and review necessary to investigate all aspects of a note purchase, including risk assessment, costs, property condition, etc.

 

Re-performing / Re-performer

A loan that was non-performing but has been rehabbed and is now performing.

 

Workout

The process of working with borrowers to restructure the terms of a non-performing loan to get it performing again (also the name of the bank department that does this).

Let’s talk.

For basic inquiries, just fill out this form and we’ll get back to you promptly. If you’re especially serious, use the investor form on the contact page to give us more background on your goals and interests. 

I promise not to fill your inbox with junk. This is just a way for us to begin the conversation and see if note investing makes sense for your lifestyle.