What is the best way to invest in notes with a partner?

[Eric Hyde]

Hi guys....I am interested in moving from the buy and hold side of real estate to investing in notes. I've been researching and studying and now ready for action. I have an investment partner who does not have the time or interest to commit to research or maintenance. What is the best way to structure a note partnership? Should I just create an interest rate arbitrage and borrow at one rate with the idea of getting a higher return? JV agreement? 50/50? What kind of exit strategy do I plan on with a partner? What if the note goes full term, how do I pay out my partner?

If anyone has any thoughts or ideas on the matter, fire away!  Thanks guys!

[David Faulkner]

This idea is a disaster waiting to happen IMO ... if you are new to notes, then learn on your own dime and become an expert before even thinking about taking on investment dollars from a partner. Being a buy and hold investor in no way, shape, or form prepares you to be a RE notes investor ... it is not just a completely different investment, but a completely different asset class. If you wanted to put your money to work as the investment partner to an experienced note investor and ride shotgun to learn along the way, that would be a different thing entirely and not necessarily a bad idea. However, taking investor money while you learn how to invest in a new asset class is NOT a good idea IMO. Starting out, you will make mistakes, and those mistakes will cost money, only it will not be your money that is lost but another investor's money, and then you will have to go back to them and explain that you are sorry that you lost some of their money but you don't really know what you are doing yet, or more likely go back to them and try to make up excuses for why it isn't really your fault and how were you to know that would've happened, when an experienced note investor would've seen it coming from a mile away and avoided the situation. Literally just yesterday I was chatting with a fellow investor that got themselves in a similar situation as the money partner with an inexperienced note investor as a JV partner ... it does not end well, trust me.