The Most Dangerous Myth About Mortgage Note Investing

There is a really dangerous myth and misconception floating around out there. It’s bad news for the thousands of individual investors trying to get started in mortgage note investing.

The great thing about the internet is that it is so easy to access information and learn things. You can learn how to knit, meditate, eat better, put up a kitchen backsplash and market real estate through the millions of articles and YouTube videos. It’s almost like Neo learning to fight or ride a bike in the Matrix. The bad news is that much of the information out there is junk. Some of it just isn’t up to par. More is incorrect and simply outdated. No one wants ‘fake news’, but we’re ingesting it by the hour.

One of the biggest and most harmful myths or misconceptions out there today is that you can just call around to banks, buy a solo mortgage note and start making some money.

Back in the day, when banks were really desperate you could. Ten years ago you might find them posting house flyers in their branches. That’s highly unlikely today.

In fact, you can call around to banks for months today and might never get to talk to someone who can sell you a note. Certainly never a single note on a modest sized property or loan balance. Possible, but rare. More like the odds on one of those scratch off cards you see lots of not-so-rich people buying in the gas station.

There are thousands of articles, blogs, podcasts, videos, courses and books teaching this technique. It used to work. Today it can be dangerous.

First off is the danger to your time. It’s the most precious resource you have, and once spent you can never get it back. Then there is the ROI on your time and money. Even if you land a small deal after weeks of cold calling and driving around to banks, the return is probably going to be small. That leads to lost opportunity costs. Your money has been there sitting idle that whole time. A time during which you missed out on actual deals that could have been putting money in your pocket. Worse, most get burned out and give up on what can be a highly lucrative investment space.

There are distressed notes and bank owned properties out there. Far more than most will ever tell you about. Yet, things have changed. You’ve got to be able to buy $3M-$5M worth of mortgage loans at least. Or no banker is going to want to talk to you. You have to also have a solid resume and proven track record of acquiring these pools of notes, AND successfully working them out at good ratios. That means not just trying to foreclose on everyone and taking their homes or letting properties be a blight on neighborhoods and counties. That’s too much liability for note sellers.

So, what can you do?

How can you get started in note investing if you’ve maybe only got $25,000 in your retirement account, and are new?

• Partner up
• Raise money or borrow it, or a combination of both
• Acquire notes from someone who is doing this in bulk, has access, and will break off smaller batches or individual notes for you
• Invest in a fund who is doing it, and enjoy participating in their success and returns.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Image by Fathromi Ramdlon from Pixabay