By Eddie Speed – Founder, NoteSchool
There is no question that the ability to self-direct your tax-advantaged retirement account opens up many investment opportunities. Sometimes, because there are so many investment choices and decisions, some investors simply feel overwhelmed and confused about what investment assets to purchase.
What are you looking for?
Several factors impact the type of assets investors seek out, including a person’s previous experience, their risk tolerance, tax implications, among many others. For example, investors might want the ability to do research and purchase assets quickly right from their computer. Some investors are more comfortable taking their time and relying on investments with a low risk profile, while others are more concerned with high return potential on investments that have a higher risk profile. And some investors want to be fully involved in their investment while others wish to be passive.
An investment class for all types of investors?
It’s possible there is an investment asset class that could potentially appeal to all types of investors and could be funded from several thousands of dollars to hundreds of thousands of dollars: secured real estate notes.
Secured real estate notes are promises to pay back a specific sum of money, at a specific interest rate over a specific time. And collateral for the note is the property. Investors can purchase secured real estate notes and earn interest from the borrower paying back the note. With advancements in technology, it’s possible to research and find secured real estate notes online from the comfort of your home or office.
Passive or active investing possible with real estate notes
There are basically two classes of real estate notes: performing and non-performing. A performing note indicates the borrower is up-to-date with payments and a non-performing note means the borrower is behind or not making payments. Which asset class you choose will depend upon risk tolerance, potential rate of return and whether you want to be passive or active.
Passive investors are often attracted to performing notes that they can purchase today and begin receiving payments quickly. Often a performing note is purchased through and managed by a loan service company. They manage all the transactions and requirements related to the note, including providing payments to the investor. These payments arrive every month based on the terms of the note.
A more active investor might be more attracted to non-performing notes. A non-performing real estate note offers the possibility of acquiring the actual property if the borrower doesn’t meet the note’s terms. Often this could provide more investment return potential – getting a property at discount, but also requires much more responsibility of the investor. The investor would then not have an investment note, but an actual property.
Diversification and time efficiency of note investing
With the advancement of technology, investing in notes is much more efficient than in the past. An investor has access to research materials on specific note opportunities, including documentation, market statistics, valuation models and more with a click of a button. Investors can also easily research loan service providers and even purchase notes online.
The same technology also makes it possible to invest in notes secured by properties throughout the United States. Investors don’t have to be “locked into” a certain market and can take advantage of beneficial market conditions in different areas of the country.
Learn more about note investing at the Wealth Building Summit: Eddie Speed will be presenting at Equity Trust’s 2018 Wealth Building Summit, August 17-18 in Westlake, Ohio. Get more details and register here.
Since 1980, Eddie Speed has dedicated his professional life to the Note buying industry, seller financing and non-performing notes. He’s introduced innovative ideas and strategies that have positively impacted the way the industry operates today. Eddie has delivered thousands of presentations as “The Note Authority” from small groups to large stages. Fifteen years ago, Eddie founded NoteSchool, which is a highly recognized training company, specialized in the teaching of buying performing and non- performing discounted mortgage notes. He is also a principal of Colonial Capital Management LLC, which is a private equity fund that acquires discounted real estate secured notes.
Eddie Speed is not an employee of Equity Trust Company. Opinions or ideas expressed by Eddie are not necessarily those of Equity Trust Company nor do they reflect their views or endorsement. These materials are for informational purposes only. Equity Trust Company, Equity University and their affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal.
Equity Trust is a passive custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.