Smart investors often make an extreme profit by investing in promissory notes. See, a note purchase means the purchaser is buying a lender’s promissory note instead of the actual property. The foreclosure process can be expensive in time and money for financial institutions. When a loan under-performs, these institutions are often willing to sell them at a discount. Note purchases are a risky business though. Legal counsel is strongly advised for all note purchases.

Again, when an investor purchases a promissory note, the buyer buys a lien right from a lender. This means, the buyer can’t actually possess the property. Consequently, the buyer often can’t have the property inspected. The property is generally occupied by the original borrower.

Now, this is important: If the borrower can’t repay the loan, the buyer will then have to go through the lengthy foreclosure process that the first financial institution was trying to avoid.

Now, here’s the deal. These can work, especially if the buyer is able to reduce the borrower’s monthly payment. The buyer will also have to make a profit, of course. So, a low-priced note means all the difference.

Investors purchasing a promissory note can view a foreclosure like a landlord views a tenant eviction. Well, except that a foreclosure is far more expensive and time consuming. Foreclosures usually require lawyer and trustee fees upfront.  The potential for having to foreclose on a borrower is the main reason so many investors shy away from note purchases.

Thankfully, there are many ways to invest in real estate.


