A note is an asset secured by real property that can be resold, traded, or held. Enjoy the benefits of owning a valuable asset without the hassle of a regular rental.
Individual notes come with different types of warranties. Browse our Note Vault and find the note that fits your requirements. Search by yield amount, warranty length, lien position, price, months seasoned, and more.
Enjoy 8% to 15% Yields
Individual notes can be purchased for as little as $8,000 and bring the note owner a high, steady yield. Enjoy monthly payments from the borrower with the option to resell your asset at any time.
Frequently Asked Questions
Why is owning a note better than purchasing a rental property?
It may or may not be better. Being the bank instead of the landlord is usually the better way to go. There are a lot less hassles, such as not having to maintain anything on the property and not having to worry about finding tenants over and over. However, there are two potential disadvantages to being the bank. First, if the borrower stops paying, you may have to foreclose instead of evict. Foreclosure takes longer and costs more. Secondly, you don’t get to participate in any upwards price movement on the property, but that also means you get more protection from any downwards price movement.
Is there a lot of work involved in managing a note?
Usually, all you need to do is reconcile your bank account each month with your payment that was received. Most of the investors that purchase individual notes through Hughes Private Capital have our company manage them and have our servicer collect the payment. It is normally a very hands-off, passive investment.
How do you determine the purchase price of a note?
Here are the 5 main criteria used in pricing a note:
1) The amount of equity or loan-to-value (LTV) in the property. If it is a junior lien, then it is the amount of combined loan-to-value (CLTV).
2) The borrower’s credit score.
3) Does it have a warranty? For how long, and what does it protect?
4) How many months has it been seasoned? (Seasoned means the number of months it has been paying.)
5) Is it in a non-judicial or a judicial state for foreclosure? Judicial states take longer to process a home through foreclosure, therefore they are less desirable.
The price will also differ depending on whether it is a senior (1st) or junior (2nd) lien. For more information on how to price junior notes, click here to get our white paper, “Pricing Junior Lien Notes.”
What makes the notes have different yields?
Every note is unique. The yield is a pricing structure reflecting some of the protections and risks unique to that note. A note with a 13.5% yield has less protection and more risk than a note at an 8% yield. It is important to understand what those risks are and then you can decide if you are comfortable with them or not. Some investors find they are comfortable with the risk and want to collect the additional yield on their investment. In general,
Higher Yield = More Risk = Lower Purchase Price
Lower Yield = Less Risk = Higher Purchase Price
What happens if the borrower stops paying their monthly payments?
There are a lot of different variables to that question depending on the type of note. The first step is always to work with the borrower and try to get them paying again.
If it is a senior lien on a home that we have found a homebuyer for in one of our starter homes in the Midwest, we will find a new homebuyer to buy the home and structure a new note/mortgage. Remember, you are secured by the property and its tangible value.
If it is a junior lien, we will need to know if they are performing on their senior lien and figure out what their plan is to start paying again. Sometimes they have just run into a temporary problem and need to adjust their payment for a few months. The last resort is to start the foreclosure process.
If you have a warranty on the note with us, then there will be one of three options:
1. We will get it performing again
2. We will replace it with a similar note
3. We will refund your money, less any payments received to date
It seems scary to own a note in a different state. Are there any disadvantages to this?
We get it that it can seem scary, but there is no need to worry. This is actually one of the best advantages to owning a note or mortgage, instead of being being a landlord. Think about your own mortgage. Did the lender make sure that someone was in your city watching your home? No – that was done remotely, and there was no extra risk to the lender because of that. The homeowner is responsible for the home, and you are only responsible for collecting the payment. That can be done from anywhere!
Is there a way for me to pool my note with notes from other investors?
Yes! We have different investment funds that you could put your note into, and then you would be diversified across all the notes within the fund. That is usually the better way to go, since your risk is lowered. Most of the time the fund will buy your note, and the value of the note can be used for your portion of your investment within the fund. You can always add to or reduce that amount, depending on how much you want to have invested in the fund. It is best to contact us to find out how it works.
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enjoying steady yields without the hassle.
This is not an offer to buy or sell any security or interest. 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. Hughes Private Capital, LLC is limited to accepting only Accredited Investors with a minimum of $10,000 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 primary residence; or a natural person who had an individual income in excess of $200,000 in each of the most two most recent years or joint income with Client's spouse in excess of $300,000 in each of those years.