How to “Be the Bank” by Investing in Notes

Note investing is a little know
investment strategy that can provide high returns and low risk. You can get
started investing in notes by
learning the basics of the investment strategy and finding a private lender who
specializes in alternative investment strategies.

Have you
ever heard of investing in notes?
Probably not, but you are most likely already doing it. If you have a credit
card, car payment, student loan, or mortgage, you are in the note investing business. But, you are
on the wrong side of it. You are paying interest on a note to a bank or note
holder instead of earning high interest rates by being the bank. When you
purchase a note you become the bank and have many of the advantages like high
interest rates and security that the bank has. This includes the ability to
renegotiate the terms of the note in some cases, earn higher than average
interest rates, and have a consistent interest income that is not dependent on
market conditions. If this sounds like it is too good to be true, it is not. Note investing is a little known but
very legitimate type of investment that money savvy investors and banks take
advantage of regularly.

If you want
to get started in note investing, it
is important that you learn the basics about the types of notes you can
purchase and what your role as the investor is. Note investing has a number of
advantages, but perhaps the most appealing is that it creates passive cash
flow. This means that you don’t have to do anything to earn the money beyond
your initial time commitment to obtain the investment. The capital you invest
then begins to work for you, earning you interest each month without requiring
time or additional money.

One popular
way to start investing in notes is
to invest in real estate notes. In this situation you basically buy a
promissory note that is part of a mortgage. You hold the note and earn
interest. You receive payments each month until the mortgage is paid in full
and then you get back your initial investment. You don’t have to work for your
payments, you sit back and let the cash flow in.

Benefits of Investing in Notes

Passive cash
flow, as mentioned above, is probably the most appealing benefit to most
investors who engage in note investing.
It is truly a way to let you money work for you, rather than you working for
your money which is often the case. In addition, investing in notes is a relatively safe investment because the note
you invest in has a fixed interest rate. If you sign on for a 5% note, the rate
is always 5%. It is exempt from market fluctuations and you will not lose money
if some catastrophe occurs to close the Chinese stock market, or of Wall Street
crashes. Your interest is fixed and you can earn high percentages. Think about
the interest you pay on your credit card every month. If you own the note, you
get paid that instead of paying it to Visa.

Aside from
consistent cash flow that you don’t have to work for and high interest rates, note investing is also an easier
investment that can be cashed out quickly, if need be. Think about real estate,
if you own an investment property you have to maintain it and if you want to
sell it, it can take months or even years to find the right buyer. If you own
the note on an investment property, you have absolutely no maintenance and a
note is easier to sell than a physical piece of property.

Investing in notes is also a versatile investment
strategy. You can flip a note like in the case of a non-performing note that is
sold as performing, you can rehab a note by working out a loan modification if
a borrower is struggling to make payments, or you can even borrow against a
note and use it as collateral. Each type of note investing has various advantages that can help you make your
money work for you.

Like any investment, there are also risks involved in note investing.

You can help
minimize these risks by working with a private lender who specializes in
alternative investment strategies. Here at Level 4 Funding we work investors to
reap the benefits of note investing while helping to mitigate the risks
involved. Call us today to have all your note investing questions answered.