Notes: The Basics
For those not familiar with notes or note investing, here’s a primer on a few basic terms. For a fuller understanding of notes and how note investing works in the real estate industry, visit PPRNoteCo.com/resources to download an e-book by Dave Van Horn, listen to note investing podcasts or discover groups and blogs on the topic. Note: A promise to repay a loan, typically in the form of a contract in which the borrower agrees to repay a certain portion of the loan to the lender within a set period of time and under specific terms (interest rate, penalties for late payments, etc.). Performing note/Re-performing note: A loan on which payments of interest and principal are less than 90 days past due. This note has gone delinquent but regained performing status after at least a 12-month pay history. Nonperforming note: A loan in default or nearing that status. Many loans become nonperforming after being in default for three months, but this can depend on the terms.
Secured note: Backed or secured by an asset such as hard real estate
Unsecured note: Not backed by an asset; examples include student loans, credit card debt or medical debt
and-flips. Meanwhile, he had also started his own business, Van Horn Painting. At 42, Van Horn reached a crossroads. He was injured and couldn’t work in his painting business. Fortunately, he had built up enough properties that he still had income. He decided to transition fully into real estate. With 40 rental units, he was well on his way toward a goal he’d set to own 100 rentals. Like many investors, Van Horn was always on the hunt for leverage. In the beginning, he was using traditional bank financing. Later, he was introduced
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