Jackson MS. Note Investing: What are the pitfalls?

[Account Closed]

I have company who I was considering purchasing a 5 year note but since it is my first rodeo, I was looking for guidance as to what to ask the note company?

I asked some basic question and here was their response:

"All of our notes are handled by a closing attorney or title company who records the transaction at the county putting you in the 1st lien position. We are not pooling funds. You will be a single lender dealing with a single borrower. This is a non-recourse loan; which means it is 100% secured by the property.

Title insurance is absolutely required on every single property we deal with.

We have an automated payment system in place that facilitates bank to bank transfer for monthly payments. If a payment is late, we are notified by email and immediately inquire as to why. Additionally, we monitor property taxes to insure payment.

We haven't had a single default, but if one were to occur, we will act on your behalf to take steps including issuing a Notice of Default and starting the foreclosure process.

When we send initial information on the note purchase by email, you will receive an appraisal, after-rehab photos of the property and a Note Purchase Agreement (a non-binding intent to buy the note).

Once you sign the Note Purchase Agreement and return it to us, the closing attorney prepares the closing documents and sends them to us for review. After our review and approval, the documents are sent to you for review and approval.

The closing package includes the HUD-1 closing statement on the purchase of the property, original note and deed of trust (or mortgage), assignment of both, hazard and liability insurance showing you as the additional insured and the title policy in your favor."

Where could this go wrong?