Note VS investment properties

[Roong K.]

I'm exploring if Notes is worth the investment versus investing in rental SFH, plex, or stock market. I saw note rates (ie fci exchange, loanmls) are about 6-12%. What do you see as advantage & disadvantage of notes investment over investment properties or stock market? Thanks!

[Adam Adams]

Here are my thoughts on Notes vs Rentals.

A note is the same payment for 30 years. $500 a month today isn't going to be the same as $500 in 25 years. However, on a rental, I can raise the rent to fit the times. And as an owner of rentals, I do not get calls in the middle of the night. Get a property manager, @Cody Cox.  :P My property manager gets the phone calls and collects the rents.

You also get some tax benefits with owning property and appreciation.

However, I like having a mix though. Notes are predictable because I don't have the expenses that I do with a rental. We buy our notes when they are not performing. When I get them performing, or create a new note, I'm getting it at a steep discount. Personally, I wouldn't pay for a performing note because if they stop paying, then my return is shot. There are plenty of people out there that make a great living off of buying performing notes. And they are great for a retirement account.

In the end, it's all about cash flow. A little formula that I like to use is, $1000 in rents is the same as a $500 P&I Payment. At least in the here and now.

That's just my 2 cents in today's dollars.