Buy notes or hard money funds?

[Dana Yobst]

Hi, I'm a new investor and bought 5 multi-unit buildings this year.  I'm ready to build on that and am investing buying notes or using a RE fund.  I live abroad now and have no W2 or way to evaluate properties myself so I'm thinking that may be a safer bet rather than buying more houses..... not sure. 

I have NO IDEA what I'm doing though and need to learn.  the turn key provider i bought properties from has hard money lending opps but i am not sure what i should look for to make sure i'm not going to get ripped off. 

Thanks!

[Wayne Snell]

Dana, there is a LOT of research and content here on BP about purchasing notes. I would definitely start there. If you are looking for consistent, stable returns you can buy performing loans that will return between 6-10%. Look for loans that are seasoned at least 12 months, have a solid performance history and are managed by a licensed servicer. That way you are just getting mailbox money. If you are looking for higher returns then non-performing notes are more likely to get you there. You can passively invest in a JV type scenario. Most notes investors will do a 50/50 profit split with their JV partners where the JV funds the deal (note purchase + workout costs) and the note investor does all of the work. Again you want them to use a licensed servicer. There are numerous potential exit strategies in this scenario. There are potentially higher rewards, but as you would expect the risk increases as well. I'm happy to share with you some of the ways my company mitigates the risks if you want to discuss offline.

Alternately, most RE funds are completely passive, and pay dividends on the profits, either quarterly or annually. I have seen a few out there that are paying between 6-15%. One I am familiar with is Fairay. www.sbrefunds.com (Disclosure: I do not invest in it so you need to do your on research as the the validity of their return claims)