Why You should Stop Buying Rentals And Become The Bank

[Fred Ramos]

Let's set the tone straight; most people don't get into the rental business because they like to manage problematic tenants, deal with leaky toilets or attend eviction hearings.

Most people follow traditional investment strategies, that are taught to be passive, but that in reality are far from passive for the great majority of investors.

At the very core, most people begin in therental business because they believe in the fundamentals of investing and desire to create some level of freedom and passive income to supplement their current income, and at the same time would like to have some sort of control over their investment.

There is nothing wrong with this, and i certainly wouldn’t want to discourage anyone from buying rental houses, if that’s what you really want to do. This article will simply show you a different way. A better way to create true passive income.

The whole idea of investing in an asset is to let the hard earned money you have accumulated over the years, work for you, to let it grow for retirement,on its own, without having to invest more time and energy. Isn’t that what an investment should do?

Let's take a look at the definition of passive income.

Investopedia's definition of passive income is "Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved."

The key words are "not materially involved"

With rentals, this passive income idea becomes illusive as the mere management of it can become a big undertaking. If you hire the wrong management company, or if tenants don’t pay the rent and you have to evict and then rehab afterwards.

In addition, if you have a sizeable portfolio this becomes a real operation and could become far from a passive investment.

Managing 100 houses is a real operation that even management companies have trouble doing.

Real Estate Notes.

Investing in real estate notes gives you the freedom and flexibility to keep your current job and still enjoy an above average return without the headaches of managing tenants or dealing with management companies.

But first. What is a real estate note?

There is a lot of confusion in the market place about what real estate notes are and I’d like to demystified and simplify what a real estate note is. Because, it’s not rocket science. It truly isn’t. in fact. Real estate notes have been around since the barter system was around.

A real estate note in its simplest form is a loan. A loan that is securitized with real estate. It is a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise.

Some of the Benefits of investing in real estate notes are:

1. A Real Estate note offers you the ability to keep your 9 to 5 and still be able to enjoy a passive return

Most of us have primary jobs that we’d like to keep. Real estate notes allows us the time to keep doing what we do best and still be able to grow our retirement basket with an above average return.

2. Avoid the typical hassles of owning rentals.

If you want to deal with tenants, evictions, leaky toilets etc, then having rentals is the way to go, but most of us aren’t particularly interested in doing that, especially when we have full time jobs and families to take care of and spend time with.

3. Monthly and Consistent income you can count on.

Most people are very responsible when it comes to paying their mortgage payment. There is a different level of commitment with owners than with renters, wouldn’t you agree?

4. Real Estate notes are backed by real estate:

Default is always a possibility. It’s one of the biggest risks that comes with investing in real estate notes. There are ways to mitigate this risk by buying notes that are in states where the foreclosure is simple and quick, like it is in Texas.

5.Real estate notes are backed by real estate.

The underlying collateral is real estate. A hard asset you can touch, see, put a value, and insure against. Tell that to your stock broker and share your experience with us.

6. Insurable against loss.

When was the last time your stock broker, insurance company or bank insured your stock against lost?

In short, this article was written to show you a different way to invest in real estate, to demystify the note business and to give a different option to a market place that has put a whole lot of energy into a singular form of investing for far too many years. It’s time for a better way.

[Karl B.]

Great post. Do you (or any of the other posters) recommend any books on notes? I have a working knowledge of them but want to learn much more about them.  Many thanks!

[Anthony Johnson]

Great article, thank your for the education.   I like the extra dimension this would add to my portfolio.   I would do this before I stuck some money in  my Scottrade Account.

[Bob Malecki]

Hi @Karl B. here are a few resources that may be of interest if you are just getting started:

Below is a link to Fuquan Bilal's book and a new e-book from Dave Van Horn about NPL investing. 

http://www.amazon.com/Turning-Distress-Into-Success-Investing/dp/1495171930

https://www.pprnoteco.com/wp-content/uploads/2016/08/Intro_to_Note_Investing.pdf

Also, feel free to PM me if you want some links on starter education resources. The moderators may remove my post if I put them here!

Bob

[Karl B.]

Originally posted by @Bob Malecki:

Hi @Karl B. here are a few resources that may be of interest if you are just getting started:

Below is a link to Fuquan Bilal's book and a new e-book from Dave Van Horn about NPL investing. 

http://www.amazon.com/Turning-Distress-Into-Success-Investing/dp/1495171930

https://www.pprnoteco.com/wp-content/uploads/2016/08/Intro_to_Note_Investing.pdf

Also, feel free to PM me if you want some links on starter education resources. The moderators may remove my post if I put them here!

Bob

 Awesome! Thank you so much, Bob. I appreciate it. I'll read the sources you supplied and will PM you once I'm done. Again, thank you for both your kindness and expertise!