Easy Steps To Start Note Investing

real estate investment notes
How to purchase Investment notes

How To Start Note Investing

Investing is a great way to build passive income, boost retirement savings, and for some, create generational wealth. It is often claimed that real estate investing creates millionaires, and so many are looking to find ways to invest in real estate.

Real estate investments aren’t just for house flippers and landlords. Real estate notes are one of the easiest ways you can invest in real estate. Now you can easily invest in real estate without the hassle of flipping or renting properties.

Unlike other real estate investments, note investing is a fast and easy investment that anyone can do, without the added stress of property management. With near-unlimited options in real estate types and notes available to invest in, anyone can invest in notes.

Ready To Start Note Investing? See how easy it is to start note investing with this simple guide below.

Choosing To Invest

Mortgage Note Investing is purchasing a mortgage note from a lender at a discount, to profit from the interest from a mortgage note. Instead of purchasing a property with the intent to repair and sell for a profit (flip) or rent a property to tenants for a profit, you can instead purchase the loan on a property and profit from the interest paid.

No matter if it is a homeowner or a house flippers most properties have a mortgage. Banks and lenders will offer mortgage notes at a discount to free up capital for their business. They will offer notes to investors to purchase at a discount, and in return, some lenders may even offer serving making it easier to profit from a note. The Note investor will then profit from the interest collected on the mortgage note.

Often when lenders offer notes to be purchased they offer a large selection of low-risk notes, with small changes of foreclosures. This makes note investing a safer investment than others because of minimal investment from the note investor with easy passive income.

keys to the house
You can buy mortgage notes

So what is note investing and is it worth investing in? We list the following reasons investors choose mortgage notes below:

Why Invest In Mortgage Notes

  • High Yield Returns – Mortgage notes tend to have high return rates and with real estate performing well.
  • Passive Income – Mortgage Notes Offer A hand-off way to invest in real estate and earn monthly passive investment income.
  • IRA Friendly – you can invest in trust deeds with IRA and other forms of investments, making it easy to invest and manage.
  • Rollover Option – Your mortgage note can be automatically rolled over your next investment so you don’t miss out on earning interest or future investment opportunities.

Mortgage note investing is a simple, hands-free way to invest in real estate and build passive income.  

Picking Your Note Investment

Once you have decided to invest in notes, the research begins. Much like a treasure hunter studying a map, you will have to navigate the terms, types, and options for your next investment. We break down the basics of notes investments below so you can find the right note for you.

Like real estate itself, mortgage notes come in many shapes and sizes, so knowing how to identify the different types of notes is essential to any real estate investor. These terms are used to identify the type of notes.

Mortgage loans can be broken down into several sub-categories:


  • First Position: A first position loan is a primary loan on a property. In the event of a foreclosure, a first position loan is paid first.
  • Second Position Loans: A second position loan is a mortgage that is secondary to the first position loan. These loans are often for lower amounts but run a higher risk, as they are paid out after the primary loan.

Secured Vs. Unsecured:

  • Secured: Secured mortgages have tangible assets tied to the loan, such as real estate property.
  • Unsecured: Unsecured loans are not tied to a particular asset, these tend to be higher risk than secured loans.


  • Private loan: A Private loan may be a note that was funded by a private lender (not a traditional bank) this could be either a hard money lender or a private money lender.
  • Institutional loan: Sometimes called a traditional lender, these are your standard mortgage or deeds of trust that are funded by banks and credit unions.

The above terminology can help any investor find the perfect note to invest in. Depending on your risk profile, lenders, and property type most deeds of trust can make great investments.

Once you learn about the mortgage notes that offer the best benefits and returns for you, you can purchase a mortgage note!

Is buying mortgage notes a good investment

Purchasing Your Note

Purchasing a note investment is a fast and seamless experience. With as many options to purchase as there are to invest. No matter how much you are willing to invest you can easily find a note investment option that fits your portfolio.

The first step to investing is working with a seller. Whether you choose to use a bank, hard money lender, or even crowdsource a note you will want to research who you are purchasing a note from.

Research your options to make the best decision for you

Before you purchase make sure you research who you are purchasing from including, rates, terms, and servicing. (some note sellers will handle how the note is serviced so you receive your payments without having to speak to the borrower.) Additionally, some lenders will send you a list of possible notes to review.

Before you invest make sure that you research the 3 Ps for your next note: 

  • The Paper: Note documentation, such as the mortgage note (or trust deed or contract for deed), property settlement statement, payment history, etc.
  • The Property: Review a current appraisal of the property or the current status and the investment (flips or rental). Make sure that the property is in good shape so you can sell it in case of foreclosure.
  • The Payor: In a note sale, you will not have contact with the payor, but check the status of the payor's payment status, employment, and credit score if necessary.

If everything about the seller checks all the boxes, you then can proceed with buying your note. You can pay for your trust deed investment in a variety of ways, including:

  • IRA / Retirement Accounts: Use your self-directed IRAs to invest in a note and diversify your portfolio. Call us today for more information on how to use your IRA to invest in a note.  
  • Cash: One of the simplest ways to invest in a real estate note is cash down! You can start investing and profiting from your note today.
  • Crowdfunding: On some crowdfunding programs you can pool money together to purchase a property with less down (but smaller payouts). To purchase a crowdfunded property you will need to join a program or REIT to purchase your note.

Buying a mortgage note can be as easy as 1,2,3. Investing in mortgage notes is a great way to easily invest in real estate.


By investing in real estate notes you can profit from the interest of mortgage notes, without the stress of managing a property.

Finding and buying the note for your next investment doesn't have to be complicated.

Here are the easy steps to start note investing:

  • Choosing to Invest: There are many benefits to real estate note investing. Whether you want passive income or promising returns, investing in notes is a great way to bolster your portfolio.
  • Picking Your Note: There are an endless amount of note options to suit any investor. Make sure you know the basics for good and bad notes so you can pick performing investments.
  • Purchasing A Note: You have many options for purchasing a note, from your IRA, cash, or even crowdfunded investment! Make sure you heavily research your seller before buying and your investment before you buy!

Author: Catherine Way is the Marketing Manager at Prime Plus Mortgages: Mortgage Note Investing. She has created content for the following industries: Real Estate, Mortgage, Finance, Business, Real Estate Investing, and many more.

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