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  • Alecia Bolton

Maximize Your Passive Income with Mortgage Notes: A Guide to Hands-Off Investing

You might be asking yourself, how can I invest 100% passively? And still get high returns?

You can't. There is no such thing as a 100% passive investment. Especially with alternative investments. However, mortgage notes might be as close as you get. And if you really want to be hands off, you can partner with someone who will sell you a partial, or manage your portfolio, and then it's truly mailbox money.

As I alluded to in the last blog post, no matter how you're investing, you're doing due diligence on something when investing in mortgage notes. It's either the person you're investing with in order to be as passive as possible. Or it's the investment itself. The due diligence you do is very different depending on how you're investing. And both can be time intensive.

Due diligence on an investment is pretty straightforward, although it can lead you on some twisty turns. But ultimately, you are assessing the underlying asset of the note, whatever that may be. You're taking a look at the borrower and the pay history to make sure they've been making their payments consistently and on time. And you're looking at the note itself, the terms, collateral file, and servicing history. This is typically only done once and prior to purchasing the note.

Due diligence on the person you are investing with can be trickier. You can look at their track record and time in the industry. You'll assess their character, to the best of your ability, and put some legal documents in place to protect yourself and your investment. But ultimately, you are trusting someone with your money and the protection of your money. And that can be difficult as it can be so subjective.

There are several ways of working with people to manage your money. This includes owning a portfolio and having an asset manager, partials/hypothecation, or joint ventures, and there are assets that work well in any of those structures. You just need to research what makes sense to you, your risk threshold, and the investment.

Mortgage note investing isn't 100% passive, but once you've done your due diligence, it can be pretty darn close.

mailbox with cash


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