HOUSING NEWS REPORT BUSINESS FUNDAM NTALS
NOTES
Note Investing fromAfar DON’T LET DISTANCE DETER YOU FROM A SOLID INVESTMENT.
hundreds of thousands of investors? Or would you rather own a note secured by a house in which you are the first to be paid off and you share that status with nobody? Also think about this: stocks are almost always sold above book value. Mortgage notes are almost always sold below book value. Do you want to sell a stock? Call a broker and take what the market will pay. It doesn’t matter how many you call on a given day, you will get the same number. Do you want to sell a note? Call investors and negotiate with them. You will get different numbers, some higher, some lower. If you don’t like the numbers, sell the next X number
of years of the payments and keep the rest. Or sell half of each payment and keep the other half. Try that with a stock! Some people just don't like the idea of buying a note on a house they can’t keep an eye on. I know that feeling, but that has to be directed toward its prop- er place. When you buy a rental house, by all means, know it. Kick the bricks. My rentals are all within 15 minutes from my house, and I drive by each one every couple of weeks. I want to see if the lawn is mowed, if vehicles are parked on the grass, if trash is visible, etc. I want my rentals to look just like the owner-occupied homes in the rest
of the neighborhood. But when you buy a mortgage or trust deed note, you are not buying the prop- erty. You are buying an IOU, a promise to pay. Like a stock, it really shouldn’t matter to you where the property is located. Granted, if things go sour, you may end up owning the property, but that possibil- ity is pretty remote if you buy right.
byW.J. Mencarow
ould you buy real estate hundreds of miles away from home? Most people would say, “No way!” Would you buy a real estate note hun- dreds of miles away from home? Before you say, “No way!” think about this: call the note a “stock” and you wouldn’t care where the real estate W
is — even if it’s offshore. Stock investors rely on the anticipated success of the company (the growth approach) and/or the book value (the value approach, i.e., the liquidation value of the assets). Do you know that if a company goes under, stockholders are behind both bondholders and owners of preferred
shares? Stockholders are, at best, third-position lienholders. In default, which would you want to own: a stock secured by a company’s assets in which you are the last to be paid off (assuming there is any money left), af- ter bondholders and owners of preferred shares, and you share third position with
> Continued on :: PG 84
W. J. Mencarow is president of The Paper Source, Inc., an educational organization for note investors and brokers since 1987. He offers a free eight-part ecourse on
notes at PaperSourceOnline.com.
44 | think realty magazine :: january / february 2019
thinkrealty . com | 45
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