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  • Alecia Bolton

Calculating Your Investment: How to Determine the Right Amount to Invest in Mortgage Notes

Mortgage notes are indeed an intriguing alternative asset class due to their potential for low risk, if managed correctly. This investment strategy is known for its cash-heavy nature, requiring a significant amount of capital upfront. While it may seem like a venture reserved for those with deep pockets, the reality is quite different.

Contrary to popular belief, investing in mortgage notes is not exclusive to individuals with substantial funds. In fact, it is possible to enter this market with a relatively small investment. For instance, one of my most profitable notes was on a piece of vacant land in Florida, and required a total investment of just $7,333. The key challenge lies in striking a balance between your risk tolerance and return expectations.

So, what does this mean in practice? There are several avenues through which you can explore mortgage note investments:

  1. Consider notes that are nearing the end of their amortization period. During this phase, the payments consist mainly of principal, with only a few installments remaining. Such notes are often available at a large discount, potentially boosting your overall yield.

  2. Explore land notes, like the example mentioned earlier. Land notes offer unique opportunities but come with higher risks compared to traditional single-family notes. Conduct thorough due diligence, as the evaluation process for land notes differs significantly.

  3. Alternatively, you can opt for partials or hypothecation if you have limited investment capital or lack in-depth knowledge about note investing. By collaborating with a trusted investor, you can purchase a partial note, allowing you to tailor the investment terms based on your available funds.

Firefly Note Solutions is one such trusted investor. Schedule a call with us today to discuss your goals.


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