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What is a Note?

Jan 4, 2017 by

Why Ignore Profits in the Note Business,

When You are Already In It?

(What Is A Note?)

Joseph Varnadore/NoteSchool

Most real estate investors have heard of the “Note Business” but many misunderstand it while others think that it is completely separate from the real estate business. The fact is, most real estate investors are in the note business, and they just don’t know it. The note business is the financing side of the real estate business.

Note Business in the Simplest Terms

The note business is based upon the purchase, sale and assigning of two documents: the promissory note and the mortgage agreement. These two documents represent a promise to pay and a solution for non-payment.

Note = Promissory Note = IOU (I Owe You)

Mortgage = Collateral Agreement = Foreclosure Agreement

When someone borrows money to purchase real estate, they have to sign an agreement to promise to pay it back. This agreement also outlines the terms of the payback. This written promise is not enough to get a loan. This promise must be backed by collateral of value, which is typically the real estate itself. The collateral agreement pre-authorizes the foreclosure of the property if the debt is not paid according to the promissory note.

Move from the Paying End to the Receiving End of the Business

So, if you have ever borrowed money from a traditional lender, private or hard-money lender, or even a property seller, you have been in the “note business”! Well, you have been on the paying side of the note business. Why not get on the receiving end of the note business!

In the receiving end of the note business, you can receive monthly cash flow without the headaches and liabilities of being a landlord, lump sum cash payouts, or even end up with the property at 30 to 40 cents on the dollar!

Acquire Property or Cash Flow for Pennies on the Dollar

Today’s inventory of both performing and non-performing notes is so massive that it doubles the number of foreclosures since 2008. This supply has prices for notes at historical lows but it will not last forever.


When you buy a non-performing note on a vacant home, you will acquire a Deed in Lieu or foreclose and end up with the property. You are a real estate investor simply acquiring property in a different way.

If you buy a non-performing note on an occupied property, you will either modify the loan to start receiving monthly cash flow, get a Deed in Lieu or foreclose.


When you purchase a performing note, you acquire long term, real estate backed, monthly cash flow. Today, these assets can be purchased for 60 cents on the dollar. That is an unbelievably good deal. No land lording, no hassles, just automatic monthly deposits into your account.

Learn More

Joe Varnadore from NoteSchool will be presenting on January 9, 2017, at the  Georgia Real Estate Investors Association (GaREIA) General Meeting. You owe it to yourself to learn more about this huge opportunity in real estate!

We will show you case studies, where notes were purchased for as little as $3000 and made triple digit returns.

More info on January 9 General Meeting

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More on Buying Real Estate Notes

Jan 3, 2017 by

What Should A New Real Estate Investor Do?


Joseph Varnadore/NoteSchool


Today more and more people are attracted to real estate and naturally by extension, real estate investment associations and clubs. Many of these investors are new or “newbie” investors who are easily overwhelmed with information and constantly search for the best way to start. They suffer from paralysis of analysis.


The instructors at NoteSchool each have dozens of years of experience in the real estate investment space. This includes buying real property and mortgage-backed notes. In this article we will use that insight to cut through the “noise” so that you can get started making money in real estate investments by breaking this industry down to the very simple basics.

Two Ways to Acquire Real Estate

As an investor, you can acquire real property by purchasing the property outright or by purchasing the mortgage-backed security and then acquiring the property. Several things will determine which of these two approaches you use. So let’s take a bird’s eye view of these approaches.

Acquire Real Property by Purchasing the Property Outright

In this approach you are directly acquiring the Deed to the property. The goal here obviously is to acquire the property at a discount, in fact the greater the discount the higher the profit. This requires a motivated seller. This type of acquisition is either through a voluntary sale or a legally enforced sale.


A voluntary sale would be simply purchasing the property from a motivated owner/seller. These owner/sellers include:

  • Individual motivated property owners

  • MLS listed sales

  • Disenchanted landlords

  • Owners of inherited property

  • Property in probate

  • Bank and other lender owned property (REO property)

  • Bank or other lender approved sales (short sales)

The supply of these types of properties has drastically dwindled in the past year. In fact, RealtyTrac reports that Short Sales have dropped in half in just the past 8 months. In that same time period, REO sales have dropped 25%. It should be noted that the price of these types of acquisitions has gone way up to the point where even seasoned individual investors simply can’t afford to buy and make a decent profit.


In today’s economy, most investors acquire the property through a legally enforced sale. This means that the property owner was negligent on some legally required payment and the party who is suffering the delinquency has filed a legal action for restitution. That’s a fancy way of saying “it’s time to pay the piper”.

These owner/sellers include:

  • Auction foreclosure sale for non-payment of IRS taxes

  • Auction foreclosure sale for non-payment property taxes (Tax Deed Sales)

  • Auction foreclosure sale for non-payment of HOA fees

  • Auction foreclosure sale for non-payment of a super lien

  • Auction foreclosure sale for non-payment of 1st mortgage

These types of acquisitions are competitive not only with local investors but large institutional investors such as Blackstone and other hedge funds, private equity firms and real estate investment trusts.

Acquire Real Property by

Purchasing the Mortgage-Backed Security

In this approach you are acquiring the Deed to the property by purchasing the underlying mortgage debt. The goal here, as always, is to acquire the property at a discount. As stated previously; the greater the discount the higher the profit. This type of acquisition is also through a voluntary sale or a legally enforced sale.


A voluntary sale for this acquisition type would be a relief for the property owner. These owners, looking to get out from under the enormous debt load would:

  • Sign a Deed in Lieu of Foreclosure

  • Loan modification

A Deed in Lieu allows the debtor to simply walk away from the problem. In fact, right now, the Debt Forgiveness Act allows them to walk away with out any federal tax ramifications. A loan modification allows the qualified homeowner to start making payments once again but on an adjusted loan schedule that they can afford and the debtor agrees to.


An involuntary sale for this acquisition type would be done by simply enforcing the legal documents that the property owner has already agreed to. This acquisition means the investor simply:

  • Enforces the Mortgage or Deed of Trust

Owners who simply got tired of waiting for the bank to enforce the mortgage have already vacated many of these properties. The neighbors, city and local county government are happy to see these properties acquired and turned into owner occupied homes once again.

Discount Your Way to Higher Profits

Statistics show that:

  • REO and Short Sale acquisitions are being purchased at about 30% discount

  • Non-performing mortgage-backed notes are being acquired at about 70% discount

This is where the market is today. In fact, Bloomberg just interviewed 8 of the top financial managers in the world. These top investors run companies that have unlimited funds and virtually every investment asset in the entire worldwide spectrum and yet US non-performing mortgage backed notes was a highly recommended favorite.

In addition, because the cost of entry level is significantly lower for acquiring mortgage backed notes, investors are finding that they don’t have to go into debt with a high interest acquisition loan such as a hard money loan. In fact, over the past few years we trained investors who were able to acquire properties for less than $5000 (five thousand dollars-not a typo!).

About Joe Varnadore: Investing in his first property at the age of 19, Joe learned the importance of using creative financing to make the deal work. Since then, Joe has created, brokered, bought and sold more than 10,000 real estate notes on both residential and commercial properties. As an author, speaker, and trainer for the past 25 years, he believes that there has never been a greater opportunity for real estate investors to use nonperforming notes to acquire properties and seller financing to cash out.

Learn more by attending the GaREIA General Meeting on Monday, January 9, 2017, and a full day seminar on Friday, January 13.

For more info:

January 9 General Meeting

January 13 All Day Seminar


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