Expected Returns Investing in Notes vs Rehabbing SFRs...

[Jonathan C.]

OK- so dumb/newbie type question. Even though I've rehabbed like 200 houses...don't know jack about notes :)

So in my space an average ROI in my market (DC Area) is around 12.5-15% on the sale price of property- if property sells 300K is like 35-45K. I typically put 20% down total into the deal (all in), so on 300K deal have 60K total into it. So get like 55-65% or something cash on cash return, annualized 100-110% or whatever. But, if count the 230/240K total all parties have into the deal, is only like 15-20% return on total equity, if you will, annualized lets say 30-40%.

My question is, what kind of 'average/expected' returns are you guys seeing these day on notes... let's say for sake of specificity non performing 2nds. But really on any kind of notes rough guidelines on average rates of returns would be very helpful.

I know 'it depends' but looking for any guidance in average/rule of thumb type returns similar to what I outlined on the flipping SFR example above.

I'm trying to figure out how worthwhile it would be to shift my focus from rehabbing SFRs to notes. Appreciate any advice, thanks

[Chad U.]

I too was getting similar returns as you when exclusively fix n flipping. But have transitioned full time into non performing note investing, and my average ROI on deals closed (cradle to grave) has been ~50%. This is an unleveraged cash on cash return, and is by far the most lucrative investment I've been involved in. However, it is NOT without its pitfalls, and by far from passive as many people would lead you to believe. Maybe not as intensive as a fix n flip project, but still very hands on.