If you missed last week's meeting, you missed a stellar presentation by LNR Club treasurer Eyad Salloum about real estate investing in mortgage notes. A seasoned realtor, Eyad explained the benefits of investing in notes rather than purchasing and managing properties outright, as well as a few key tricks to safeguarding the potential investment income for future generations.

 

When buying a house, people generally will arrange a mortgage loan, which is tied to a promissory note. The note is a negotiable instrument, meaning they can be bought and sold. For example, Fannie Mae and Freddie Mac sell notes to hedge funds and investment groups, explained Eyad (pictured above with Lewisville Noon's current president and fellow realtor, Dirk Dahlke). Investors can choose to purchase performing notes (homeowners are paying on time) or non-performing notes (people are behind in their payments).

 

Simply put, investing in notes can let you earn monthly income from an investment property like a landlord, without the hassle or expense of paying for things like property taxes, repairs, and vacancies. You receive a monthly payment, but the homeowner handles all the expenses associated with owning the house. You can also purchase a partial note, putting up money for part of the mortgage and earning a monthly return for a specific period at the front end of the loan.

 

Mortgage notes can be an especially appealing investment in today's hot housing market, Eyad said. Median home prices grew 17% in 2021, with median national home price rising to $317,500. That means the monthly payments to the note holder can be substantial. With 77% of counties now labeled less affordable by ATTOM Data Solutions, more prospective homeowners also are looking for owner financed options, even if it means paying a higher interest rate. If you choose to buy a note, however—whether from a hedge fund or individual investor—you should do your due diligence. You need to check the title, how long the note has been in place, and the borrower’s payment history, and also get a BPO (broker’s property opinion) on the property value, among other criteria. And of course, check with your CPA before making any investment decisions. To learn more, reach out to Eyad at eyad@thecasateam.com.

 

If you want credit for a make-up, contact LNR Membership chair Terry Russell to let him know when and where you attended another Rotary club meeting, or the date and service activity that you participated in to count as a make up. You have two weeks before and two weeks after a missed meeting to make up for your absence. Make-ups are a great way to meet Rotarians from other clubs and become more engaged with the outreach activities we do in the local community!