Private real estate notes offer an alternative and potentially lucrative investment avenue for those interested in diversifying their portfolio beyond traditional real estate investments. As a new investor, it’s crucial to understand the basics of private real estate notes before diving in. This comprehensive guide will provide an overview of what private real estate notes are, the benefits of investing in them, key components, the investment process, managing and servicing notes, and exit strategies.

What are Private Real Estate Notes?

Private real estate notes, also known as mortgage notes or trust deeds, are debt instruments secured by a mortgage or deed of trust on a property. These notes represent a promise from a borrower to repay a loan used to purchase or refinance a property. Private real estate notes can be categorized as performing or non-performing, depending on whether the borrower is making timely payments.

Why Invest in Private Real Estate Notes?

Investing in private real estate notes offers several advantages, including:

Potential for attractive returns

Private real estate notes can provide higher returns compared to traditional fixed-income investments like bonds and CDs.

Diversification benefits

Investing in real estate notes allows you to diversify your portfolio, reducing overall risk.

Passive income generation

Private real estate notes can provide a consistent stream of income through interest payments.

Lower barriers to entry

Private real estate note investing requires less capital and expertise compared to purchasing physical properties.

A businessman standing on the arrow looking through a telescope searching for financial opportunity.

Key Components of a Private Real Estate Note

A private real estate note typically consists of the following elements:

The promissory note

A written agreement between the borrower and lender outlining the terms of the loan, including the principal amount, interest rate, payment schedule, and maturity date.

The mortgage or deed of trust

A legal document that secures the promissory note by placing a lien on the property, ensuring the lender’s right to foreclose if the borrower defaults.

Underlying property

The real estate serves as collateral for the loan.

Borrower’s credit and payment history

Crucial factors in assessing the risk and potential return of the investment.

The Investment Process

Investing in private real estate notes involves the following steps:

Sourcing private real estate notes

You can find investment opportunities through online platforms, local real estate investment clubs, or by networking with industry professionals.

Evaluating and selecting notes

Assess the property value, borrower’s creditworthiness, and terms of the note to determine the investment’s potential risk and return.

Purchasing and closing the transaction

Negotiate terms, conduct due diligence, and complete the necessary paperwork to transfer ownership.

Managing and Servicing Private Real Estate Notes

infographic for a blog post on real estate note investing

As an investor, you’ll need to manage and service your private real estate notes, which may involve hiring a note servicer to track payments, communicate with borrowers, and handle delinquencies or defaults.

Exit Strategies for Private Real Estate Note Investments

When it’s time to exit your investment, consider the following strategies:

Selling the note

You can sell the note to another investor, either individually or as part of a larger portfolio.

Refinancing or restructuring the note

Work with the borrower to refinance or restructure the loan to improve its performance.

Foreclosure and property acquisition

In case of borrower default, you can foreclose on the property and sell it to recover your investment.

Learn More About Private Real Estate Note Investing With Titan Funding

Investing in private real estate notes can be a rewarding and lucrative venture for those willing to learn the ins and outs of this niche market. By understanding the basics, you’ll be better equipped to make informed decisions and build a successful investment portfolio. 

To begin, simply contact the team at Titan Funding. We specialize in private real estate notes and our knowledgeable experts are available to answer any questions and assist you in getting started. You can reach us by calling 855-928-0737 or emailing us at