Buying Notes With Land As Collateral

[Anthony Minutoli]

Good Evening Bigger Pockets Family, 

As I continue my venture deeper into the real estate realm.... I stumbled upon notes. Ran the numbers, and they are making more sense than some of these BRRRR deals and or Fix/Flips. One I currently came across is a NOTE deal that involves 7 acres of Land in Eastern Washington. I came across little information on Note investing and when you do it is vague. I saw a lot of information on NOTES tied to single family homes, apartments, and duplexes but none that have NOTES with LAND as collateral. The property is residential and would be great spot to build a forever home, but there is no permanent structure attached . Is there any difference between buying a PERFORMING NOTE with LAND attached instead of a PERFORMING NOTE with single family home, duplex, apartment , etc... attached? Any help, information or feedback would be appreciated. If you are experienced in this field even better. Thank you and have a good night.

Anthony Minutoli

[Jay Hinrichs]

Originally posted by @Andy Mirza:

In a technical sense, there should be no difference as Chad pointed out. I've never owned notes on vacant land myself. As a thought exercise, though, it seems riskier from a cash flow perspective. Since there's no one living there, there seems to be less incentive to pay if the borrower gets into trouble. It seems to me that there's a higher chance for a note on vacant land to go non performing than a note tied to residential property. If you don't mind the inconvenience of that risk, then there's no issue.

its a space we have worked in for decades.  one thing of note is the discount on raw land notes is usually far higher than owner occ or improved notes.. so the yeilds are much higher and that does mitigate risk.. the real thing to look at is how much did the buyer put down..  if its a  20k property and the buyer put 2k down  ( which is common in the land game) then that note will sell for 50% of unpaid balance with a return of at least 30 to 40% apr..  if you know what your doing its a gold mine.