I mentioned yesterday that you don’t need any specialized knowledge to invest in mortgage notes. And that’s because we utilize professional loan servicing companies to manage the mortgages that we invest in.
These companies are akin to property management firms for real estate investors. They send out monthly statements, collect the mortgage payment, and provide ongoing customer service for homeowners.
That makes investing in mortgage notes completely passive – investors don’t need to do anything other than communicate with the loan servicer periodically. The homeowner has no idea that we exist.
I suspect many of us have received a letter in the mail at some point notifying us that our mortgage had been transferred.
That letter provided us with information on how we should make our mortgage payment going forward, and it gave us a website and phone number we could call for customer service.
The letter was likely an indication that a new investor had bought our mortgage. Except it didn’t provide us with many details on that matter… it simply gave us the information we needed to manage our mortgage going forward.
So, investors don’t need any specialized knowledge to invest in mortgage notes. We simply let the professionals do the work for us.
The loan servicers charge a small fee for this service, but we don’t pay that fee. The homeowner does.
The loan servicing company simply withholds their fee from the mortgage payment the homeowner makes each month… then they send us the rest. All we have to do is check our bank account each month to make sure it came in.
As for the capital requirements – there is a surprisingly wide range of notes on the market at any given time. There are indeed six-figure mortgages available to investors with deep pockets. But there are also mortgages selling for several thousand dollars as well… with a large mix in between.
At The Phoenician League, we’ve found the $10,000 to $60,000 range to be the sweet spot. Investing in mortgages in this range can yield between 7 and 18% a year, depending on the specifics for each mortgage.
Building a portfolio of mortgages in this range can create thousands of dollars in extra monthly income for us… in a relatively short period of time. We’re going to walk through a specific example tomorrow to illustrate exactly how it works.
In the meantime, I’d like to remind you that we’re doing a strategy session on the secret world of mortgage notes next week. In it, we’ll cover everything a strategic investor needs to start building extra monthly income from this asset class.
If you are interested, you can get more information here: https://phoenicianleague.com/session
-Joe Withrow