At Wealth Without Wall Street, we often talk about becoming the bank—a strategy that can fundamentally shift your financial future. Today, we’re excited to bring you insights from Eddie Speed, a true pioneer in the note investing world, who has bought over 50,000 notes in his 44-year career. If you’re a real estate investor, or just someone looking to create consistent cash flow without the headaches of traditional rentals, this conversation is for you.
What is a Note?
A note is a promise to pay. Specifically, a mortgage note is a financial agreement where a borrower pays back a principal amount, with interest, in installments over time. When you buy a note, you’re not purchasing the property itself—you’re buying the right to collect payments, just like a bank.
How to Buy Notes
- Understand the Basics: Notes can be bought individually or in portfolios. They’re often sold by real estate investors who originally provided seller financing.
- Run the Numbers: Notes are typically purchased at a discount. For example, a $200,000 note might be sold for $180,000, providing a win-win scenario for both buyer and seller.
- Assess Risk: Eddie and his team have developed rigorous underwriting processes to evaluate the likelihood of note payments being made on time.
Advantages of Note Investing
- Higher Cash Flow: Notes often provide significantly higher net returns compared to rental properties.
- No Landlord Hassles: You’re the bank, not the property manager. Repairs, tenant complaints, and maintenance aren’t your responsibility.
- Flexible Strategies: Notes can be sold in full or in partial payments to provide liquidity when needed.
- Retirement-Friendly: Notes can be held in tax-advantaged accounts like Roth IRAs, enabling investors to grow their wealth while minimizing taxes.
Why Notes Outperform Rentals
Let’s break it down with a simple example:
- A $200,000 rental property might generate $1,600 in monthly rent.
- After expenses, which typically consume 50% of rental income, you net $800.
Now compare this to investing in a $200,000 note:
- The same $200,000 invested in a note can yield $1,800 to $2,000 in monthly net income.
- That’s over double the cash flow—without the headaches of property maintenance or tenant issues.
Timing is Everything in Investing
Eddie stresses the importance of timing in business. You don’t need to execute the perfect process if your timing is right—average processes in ideal timing can often outperform flawless execution in the wrong market conditions.Right now, the real estate market is entering a note cycle, moving away from the rental cycle we’ve experienced in recent years. Rental property owners, facing inflation and rising expenses, are realizing the returns they once enjoyed are shrinking. Eddie’s solution? Stop being a landlord and start being the bank.
Who is Note Investing For?
Eddie’s ideal student:
- Has some investable capital.
- Is disciplined and willing to learn.
- Wants a strategy to create cash flow or grow wealth.
Many successful note investors are professionals like doctors, engineers, and business owners who are seeking a more effective retirement strategy. However, even younger investors in their 30s are finding success in this space.
Why Now is the Time to Act
With rising expenses and flat rental property values, the time to explore alternative investment strategies is now. As Eddie puts it, “I can own a thousand notes with the same effort as managing 60 rentals.”
Share this article with someone who needs to hear this, and take the first step toward becoming the bank.
