WHAT IS A NOTE?
In the United States, a mortgage note (also known as a real estate lien note, borrower’s note) is a promissory note secured by a specified mortgage loan; it is a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfil the promise. While the mortgage deed or contract itself hypothecates or imposes a lien on the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and obligates the borrower, who signs the note, personally responsible for repayment
DO I OWN THE HOUSE?
This is the most asked question when it comes to investing in real estate notes. The simple answer is no, you do not own the home but rather the home is an instrument used as collateral. In case of default on the note you will get the home after foreclosure and can then resell or rent.
MORTGAGE NOTE VS TAX LEIN?
The advantage of a mortgage note over a tax lien or tax deed certificate is that a mortgage note will allow one to collect the interest on a monthly basis. Tax lien and Tax deed certificates are only paid when the lien or deed is redeemed.
IS IT SAFE?
All investments come with some kind of risk, however we feel that investing in real estate notes is a lot less risky than the stock market. When you invest in the stock market you have zero control over whether the stock goes up or down. When you invest in real estate notes if something goes wrong you can roll your sleeves up and do something about it. If a stock goes bad you are at the mercy of the corporation.
IS IT LIKE A RENTAL?
Kinda… You are collecting monthly payments from someone living in the house. However, you do not own the home and the homeowner has to pay for all of their own repairs etc. No late night calls because the toilet is overflowing!
RENTALS VS NOTES
From an investment standpoint a rental is risky like the stock market. You have up and down years in which you may make money or you may lose money. With a real estate note you know exactly what you are going to make month after month. Your net return does not change when taxes or insurance prices go up, as it is the homeowners responsibility to pay them.