The Keys to Smart Investing with Mortgage Notes: Strategies, Insights, and Services

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  • The Keys to Smart Investing with Mortgage Notes: Strategies, Insights, and Services

Why Invest In Notes?

Investing in notes offers a unique blend of advantages, compared to other alternative investments. Private loans also referred to as “notes”, can be secured or unsecured. An unsecured note is a personal loan given to someone with the personal agreement that they will pay back. These are extremely high-risk, and it is encouraged that you not invest in unsecured notes. However, investing in notes that are secured to real property is exactly what banks do. Secured not investing, simply means that there is a legal process, and those documents are of public record. This allows anyone to search and identify who the borrower is and who the lender is. Investing in notes secured to real estate provides a guarantee; if the borrower does not pay, or adhere to the obligations written in the mortgage (which the lender dictates) then the lender can take the asset from the borrower. It is truly one of the safest forms of alternative investments.

Below is a short list of additional reasons why sophisticated investors, seek out and demand diversifying their investment capital toward investing in mortgage notes:

True Passive Income

Investing in mortgage notes typically generate predictable, recurring interest payments, creating a reliable income stream for investors.

Notes Offer Lower Volatility

Compared to stocks or bonds, notes are less susceptible to market fluctuations, providing a buffer against economic downturns.

You Determine Level of Security

Notes are often secured to collateral, such as real estate, by way of security instruments, commonly referred to as mortgages or deeds of trust.

You Make the Rules

Investing in notes places the capital investor in a unique position of control. You can make the rules that the borrower must play by.

Earn More, Risk Less

Shift Risk and Reap Rewards: The Lender’s Advantage in Mortgage Note Investing

Invest in Assets! Not Liabilities.

When capital investors decide investing in mortgage notes is the method they want to use to diversify their portfolio, they are looking at investments through the eyes of a banker. Mitigating and shifting risks is the name of the game in lending and is the primary responsibility lender . When you invest as the lender in real estate, you are able to make the rules that the borrower must play by, and you are placing the responsibility and liability of those assets at the feet of the borrower. However, you also receive the benefits of owning the asset simply by investing in real estate notes. All the protective measures you require, such as property insurance, lenders’ title policy, property inspections, feasibility inspections, and project management, are all paid for by the borrower. This is truly the most passive form of real estate investing there is!

How to Invest in Mortgage Notes?

Capital investors may invest in notes, secured to real estate in several different ways. You can market for, and network with real estate investors who are looking for a private lender. You can process the loan request by collecting pertinent documents necessary for your underwriting. This is time consuming and not the most passive form of investing in real estate notes.

Barriers to Investing in Real Estate Notes

While mortgage notes offer attractive potential returns there are common barriers that stand in the way of investors being able to diversify their alternative investment investing in mortgage notes:

Access to Deals

Finding reliable sources of quality borrowers isn't always easy. Unlike publicly traded securities, notes don't have a centralized marketplace. Investors may need to rely on niche brokers, networks, or direct seller contact, which can be time-consuming and require specialized knowledge.

Lack of Transparency

Information on how to invest in mortgage notes can be limited, particularly on how to create these investments. Due diligence requires scrutinizing loan documents, property details, and borrower history, which can be challenging for smaller investors with limited resources.

Capital Requirements are a Bar to Entry

Investing in notes often requires more upfront capital compared to other investments. Depending on the loan size and type, initial investment amounts can be significant, potentially excluding individual investors with lower liquidity.

Market Illiquidity

Unlike stocks or bonds, notes aren't easily traded on secondary markets. Selling a note before maturity can be difficult, making them less flexible investments and potentially locking up capital for longer periods.

Legal and Servicing Complexities

Managing notes involves legal and servicing intricacies. Investors may need to handle delinquency issues, foreclosures, or property management, which can require expertise and resources beyond simple financial analysis.

What We Do

Loan Request Evaluation

Market, source, and underwrite the loan requests, verify and fact-check all the information found within those documents. Evaluate true property values, costs, and title work. This requires keen insight, awareness, and discernment by capital investors who invest in mortgage notes.

Document Preparation & Review

Prepare and review all necessary documents. Wire the loan amount to the real estate investor’s title company or, in most cases, to our own in-house title insurance company.

Loan Servicing

Service the loan, collect payments, inspect the project if there is construction involved, and oversee legal issues if there is a default. Depending on the state where the asset is located, servicing your own notes secured to real estate may require a license, annual fees, and ongoing education, which can increase business overhead.

Time & Team Considerations

Ultimately, investing in real estate notes can be time-consuming and create a whole new J.O.B. unless you have a team and experience in vetting and mitigating risks.

Aligned Capital Group Advantage

I believe that Aligned Capital Group offers a unique and highly flexible way for investors seeking alternative investment options to invest in notes. By becoming an investor in ACG, my partners experience the benefits of a customizable investment vehicle that invests in assets, not liabilities.

Handling Morgage Notes

Depending on the state where the asset is located, servicing your own notes secured to real estate may require a license, annual fees and ongoing education, which can increase business overhead

Here are the biggest benefits to invest in mortgage notes with Aligned Capital Group:

Low Barrier to Entry

The minimum investment in Aligned Capital Group is $50,000. This is significantly lower than what most 1st position loans secured to real estate will require from an individual investor.

Fractional Investing

As noted above, Aligned Capital Group offers the opportunity to invest alongside ACG for portions of secured notes. This allows for diversification and mitigation of risk across an investment portfolio. Example : Investor has $1,250,000 they’d like to invest. They would have the option of : 2- 625,000 investments OR 1-500k & 3-250k investments etc

True Diversification

With Aligned Capital Group there is no requirement to be fully invested into a single deal. The investor chooses the amounts to co-invest alongside ACG and has the option to take pieces of multiple notes.

Diversify Smartly – Invest in Real Estate Notes Now!