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• Astounding flexibility and creativity • High suitability for retirement accounts
PERFORMING NOTES DEFAULTED NOTES
Let’s look at each of these, and then I’ll give you an example of how a bit of creative thinking can create astounding results in your portfolio.
A TOP PICK FOR EXPERIENCED INVESTORS Why do experienced real estate investors love note invest- ing? Simple: You can become quite wealthy through real es- tate note investing. After multiple decades in and around the real estate investing business, I can say with confidence that if I had to choose one and only one asset class for every future investment, it would be real estate-secured promissory notes. Let’s take a closer look at real estate notes and why they are such an extraordinary alternative to conventional real estate investing. WHERE DO NOTES COME FROM? Real estate notes are created when you get a loan to pur- chase or refinance a piece of real estate. CoreLogic, a respected real estate data analysis compa- ny, told us in 2017 that only about 37 percent of real estate transactions were paid in cash. The remainder, 63 percent, a clear majority, were purchased in part or whole using debt financing (a loan). For each loan, there is a document that spells out the terms of the loan. These terms include the loan amount, interest rate, payment schedule and other relevant terms. That doc- ument also identifies who is responsible to pay the note (the borrower) and who is entitled to be paid (the lender). That document is the promissory note, or just note, and it has the potential to be an astounding wealth builder in your portfolio for one primary reason: Real estate notes can be bought and sold like any other financial asset. By learning which types of notes make good investments, you can build a lifetime of reliable cash flow, even more reli- able than what’s provided by rental properties. THREE FUNDAMENTAL PATHS TO PROFIT WITH REAL ESTATE NOTES Real estate notes may be the most flexible investment asset you’ll ever encounter. It’s impossible to count the different strategies that can be employed to build wealth using real estate notes as the asset class of choice. There are still fundamentally 3 approaches to building wealth through real estate notes:
FUNDAMENTAL STRATEGY #1: LOAN ORIGINATION
Loan origination is the original creation of a loan. If you’re lending money to a borrower who signs a note that commits to paying back the loan to you, you’re engaged in loan origination.
REALESTATE PASSIVE INCOME HIGHERRETURNS LONGTERMWEALTH
You’ll sometimes see the term “primary market” used to describe companies and people who are engaged in loan origination. The term “secondary market” refers to people buying and selling notes after their origination in the primary market. Most frequently, loans are originated by banks and other financial institutions. According to Forbes, America’s largest loan originator is currently Wells Fargo. While it’s entirely possible for individual investors to partic- ipate in the primary market for real estate loans, it’s relatively rare. Loan origination is a highly regulated and capital-intensive business, putting it out of reach for most individual investors. The greatest opportunity in real estate notes for individual investors is not in the primary market, but in buying and selling notes after origination. This is called the “secondary market”. FUNDAMENTAL STRATEGY #2: PERFORMING NOTES When a loan is being paid on time as promised, it is said to be a “performing” note. If you own a performing note, you are entitled to the pay- ments being made on that note. For that reason, performing notes are an attractive asset class and are routinely bought and sold by banks, mortgage lenders and investors. In fact, you have likely been involved in the performing note business without even realizing it. If you’ve ever gotten a loan to buy real estate, there’s a very good chance that a few months after you got the loan and
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thinkrealty . com | 85 This is not an offer to buy or sell any security or interest in the funds offered by Equistream Capital Management, LLC. Any such offer or solicitation may be made only by delivery of the fund’s confidential private offering memorandum and only to accredited investors in jurisdictions where permitted by law. Past performance is not indicative of future results. The information presented in this material is intended for the named addressee(s) only. As this material may contain confidential and/or privileged information, if you are not the intended recipient, you are not authorized to retain, read, copy or disseminate this material or any part of it. Any unauthorized use of this material is strictly prohibited. Equistream Capital is limited to accepting only Accredited Investors with a minimum of $20,000 or more for investment. A partial definition for an Accredited Investor is a natural person whose individual “net worth,” or joint net worth with Client’s spouse, exceeds $1,000,000 excluding the value of the primary residence, or a natural person who had an individual income in excess of $200,000 in each of the two most-recent years or joint income with Client’s spouse in excess of $300,000 in each of those years.
84 | think realty magazine :: december 2017
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