What Is a Mortgage Note?

A mortgage note is the legal promise to repay a real estate loan.

When you invest in a mortgage note:

• You own the loan, not the property
  
  

• The borrower lives in and maintains the home
  
  

• You receive payments based on the loan terms
  
  

Think: being the bank, not the landlord.

How Cash Flow Works

With a performing mortgage note:

• The borrower makes monthly payments
  
  

• Part of each payment is interest
  
  

• Part reduces the loan balance
  
  

• You receive predictable income
  
  

No tenants.
No repairs.
No property management.

Notes vs. Rentals (Quick Comparison)

Rental Properties

• Property ownership
  
  

• Tenant management
  
  

• Repairs & vacancies
  
  

Mortgage Notes

• Loan ownership
  
  

• No tenant interaction
  
  

• Contractual payments
  
  

Many investors prefer notes for simplicity and consistency.

A Simple Example

• Home price: $150,000
  
  

• Loan: $135,000 at 7%
  
  

• Monthly payment: ~$900
  
  

As the note holder, you collect payments while the borrower maintains the property.

Why Investors Like Mortgage Notes

Mortgage notes appeal to investors who want:

• Monthly or regular cash flow
  
  

• Less hands-on involvement
  
  

• Real estate exposure without being a landlord
  
  

• Income backed by real assets
  
  

One Important Reminder

Mortgage notes are not risk-free.
Proper education and due diligence matter.

Want to Learn More?

This is just a high-level overview.

If you’d like to understand how mortgage notes work in more detail — including how investors evaluate and structure them — set up a call today!