Is $25k too small to do anything in notes?

[Shari Posey]

I'm just beginning to learn about notes...high quality notes, non-performing 2nds, etc.

Is $25k too small to do anything in notes? I'm thinking of doing this rather than putting it as a down payment on another rental property. (Cash flow on the rental would be about $425 per mo.)

I have other funds available if I liquidated stocks but right now I want to get my feet wet.

If $25k is not too small, what would you buy and where do you find someone willing to sell to you?

[Loc R.]

$25k is plenty to get started with in buying notes. If you want to buy a note secured by an SFR, you'll most likely have to offer a partial purchase.

Example: $100,000 note over 10 years (120 months) at 8% interest would represent a $1213.28 a month payment. Let's say you found a seller that only wanted to raise $25,000 from the (partial) sale of the note. You could buy the next 23 payments for $25,000, which would represent a 12% yield to you, or you could buy 53 payments of "half" the payment stream ($606.64) for $25,000, also a 12% yield.

You could also partner with someone to buy a note together (your $25,000 plus their $25,000 to buy a $50,000 note).

There are a lot of ways to put together a deal, it just comes down to finding them, making sure they're good deals, and securing them.