This week’s tip is simple but often skipped: treat due diligence as non-negotiable before putting money into any alternative investment, including seller-financed notes.
A solid check starts with the collateral. Confirm the property’s current market value against recent comparable sales, not just the original appraisal. Look at the loan-to-value ratio and make sure it leaves enough equity cushion if the borrower runs into trouble. Next, review the payment history carefully. Consistent, on-time payments over at least twelve months matter more than a single strong month.
Borrower stability comes third. Verify employment or income sources, check credit trends, and understand any recent changes in their situation. For notes, pull the title report to confirm lien position and watch for unexpected judgments or tax issues.
When you are working with smaller capital—say five thousand dollars or a partial interest—these steps become even more important. Thin margins leave less room for surprises. I have seen otherwise attractive notes turn messy simply because someone skipped the title search or accepted a seller’s verbal assurance on payment history.
Run the numbers yourself or with a reliable calculator so you know the true yield after any servicing costs or reserves. Keep records of every document reviewed. Of course, every deal has its own variables, so walking the details past a qualified advisor before you commit capital remains the smartest habit.
If you want a practical way to source and evaluate these opportunities without tying up large amounts of your own money, the lists at noteinvestors.com/leads can help. The broker opportunity page outlines how some people start by referring notes rather than buying them outright. More detailed frameworks are coming in the Note Investing Formulas program later this year.
Take the extra hour on the front end. It usually saves far more time and capital later.
IN THE “HOW TO TURN 90%..” PROGRAM, YOU WILL LEARN:
