This week my wife and I have been exploring a new rental property business model that hopefully never results in us having tennants! We are getting into the distressed mortgage note business where we become private lenders. This is a pretty exciting new venture for us. We are learning the ropes from a more experience friend who is helping us to learn this very niche real estate investing strategy. Knowledge is key, risk assessment and very careful due diligence are all crucial to success in the note business.

Buying distressed mortgage notes seems to be a bit of an art as well as just crunching the numbers. Sometimes people stop paying their mortgage for reasons that are not because they 'just don't want to'. Realizing that people are often not bad people and that they will respond if you try to help them by re-organizing their loans to make their payments more manageable. The idea of dealing with imperfect borrowers is enough to put most investors off but if you can do it - it is very profitable. Our friends that are teaching us often make 8% per month on their note investments! This is an amazing return even by the stock trading standards that we are use to! Some active traders we know do much better than this (e.g. this swing trading millionaire) but these successful traders are the exception and not the rule.

So if you are looking for a new real estate investing strategy that has the potential for massive returns - be sure to check out the mortage notes business! It is very active in the begining as you do all the due diligence and searching for the best deal but once you have one re-performing the cash flow is amazing! A note that has been re-performing for 24 months then appreciates significantly in value and can be sold on as a performing note a large premium.