Promissory Notes - Risks and Benefits

[Vamsi Vikash]

Hello friends, 

I'm brand new to real estate investing. Based on my research, Promissory notes seem to be a good passive income with around 10 - 15% returns. Here are some of the websites, that I've researched so far: 

1) F Street - https://fstreet.com/ - 10% 
2) Norada Real Estate - https://www.noradarealestate.com/real-estate-markets/ - Around 15% 
3) SIMM Capital - https://simmcapital.investnext.com/portal/offerings - Exploring 

I tried to go through this blog - https://www.investopedia.com/terms/p/promissorynote.asp to understand more about the Promissory notes as well. Unfortunately, most investments are $50K minimum, and I'm in my early 30's and still trying to get that much liquid cash to invest. Can experienced investors like you, please share your thoughts, risks, or things I need to be aware of about Promissory notes? 

I'm using this as a vehicle for passive income if there are other options, please feel free to share. I'm already familiar with Stocks, Options, CDs (Ladder), Bonds,..etc. I'm looking for an option that might generate a 10% return with fewer risks (I know I know :) ) if possible. 

Cheers

[Doug Smith]

I actually prefer loans to real estate, but that's because that's mostly what I've done for more than 30 years. No tenants or toilets. That being said, it's a bit more capital intensive. We don't take less than $35K from investors when we place capital. We prefer North of $75K. It's just as expensive to manage money for smaller investors as it is for larger ones. It's really tough if you're doing it yourself with a few bucks to properly diversify the note portfolio. You usually only have an asset or two and that really amps up the default risk to your portfolio. The biggest issue with the note industry is, regardless of what some of the gurus will tell you, it's hard to teach you the pitfalls of notes in a weekend course or through a $10K "mentorship" where you jump on a call every week. A lot can go wrong and there's a lot to learn. Be very, very cautious going into note investing. It's not as simple as what the course-offering gurus will lead you to think. If you do take a course, actually pay attention to the pedigree of the instructor. Do they have a formal credit background in lending or were they are realtor, stock broker, etc...not a real lender...before they decided to teach about credit. Just my rant and advice.