Indianapolis, INThere are many reasons, many very good reasons to invest in real estate notes, primarily non-performing, first lien notes.

The first would seem to be money, but for me there is an even greater reason: to help the home owner keep the house. Doing that is first of all, a good thing, a humanitarian thing. It also can be a very profitable thing, because the note buyer stands to earn more money for the good deed than is likely to be made by taking the house to foreclosure. I’ll get into the details of how that happens in my next post.

Usually there is more than one way to make money with a real estate note, as we talked about in my last post. The key is that the non-performing notes are available for purchase sometimes for as little as 10% of face value, but usually 30% to 50%. With some careful research, quite a few bargains can be found that could turn a 5% to 30% profit within less than a year.

Notes are abundant, unlike short sales or fix and flips, which seem to be in short supply, thousands of notes go on the market every week. Why? The mortgage crises of the past several years has banks holding non-performing mortgages. They are being told by Federal banking regulations require the banks to move them off their books in order to remain solvent and in business.

Buying non-performing notes can often lead to both short-term and long-term passive income.