What is Note Investing?

[Francois Acosta]

hi everyone, im curious what a note is? ive seen around BP forums and podcasts talk about Notes for investments; I haven’t understood them. If anyone can help thanks.

[Scott Winn]

“Note Investing” is when an investor purchases an existing loan or debt from the original lender. For instance, if the seller of a property finances the purchase of their property for the buyer, the seller acts as the lender (rather than a bank or mortgage company) and a Note and “security instrument” (i.e. Trust Deed, Mortgage, Deed of Trust) are created at the closing. The note contains the repayment terms, such as interest rate, term, payment amount. The security instrument secures repayment of the note by providing remedies (foreclosure) in the event the note goes into default (usually through non-payment). The security instrument is recorded in the county records and creates a lien against the property. These notes are assignable by the seller/lender, so a note investor is one who would purchase the note (usually at a discount) from the seller/lender in order to receive payments from the buyer/borrower/debtor.