Whether you know it or not, you are already investing in notes, just probably on the wrong side of it. Note investing is the process of buying a debt that is owed and earning interest on that debt until the principal is repaid. If you interested in investing in notes, it is important that you learn all the facts so you know what you are getting into. Here are 3 quick tips to make investing in notes easier and more successful.
1. Do your research and decide which type of note you want to buy. If you are investing in notes, you can purchase credit card notes, auto loan notes, and mortgage notes among a few others. Credit card notes have the potential to earn high interest rates (just think of how much you end up paying if you carry a balance) but are also higher risk because the debt is unsecured. With an auto or home loan, the note is secured by collateral. Many experts prefer mortgage notes when investing in notes because they are a relatively safe options with the potential to make high profits over time.
2. Consider buying non-performing notes. A non-performing note is a note that is in default, meaning the borrower is not making payments on the debt. Non-performing notes can often be purchased at discounted rates and can be rehabbed. Just like a fix and flip property, you can fix and flip a note by either re-negotiating the terms with the borrower, or foreclosing and selling the collateral. This is only an option if the note is a secured debt. Once the note is current again, you can sell the note and make a nice profit.
3. Always work with a financial professional. Investing in notes can be complicated and there are many different laws, regulations, loop holes, and other details that the average person doesn’t know about. Use a broker or financial professional to help make sure your investment is secure.
If investing in notes sounds like a great investment strategy, that’s because it is. It can be an effective way to earn high interest each month without having to worry about the ups and downs of the stock market. If you are ready to start investing in notes, call us at Level 4 Funding today! We specialize in alternative investment strategies and can help you every step of the way!
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