Buying real estate notes from banks is a specialized investment strategy where you purchase the debt (the promissory note) and the security interest (the mortgage or deed of trust) rather than the physical property itself. By doing this, you essentially step into the bank's shoes, becoming the lender entitled to receive monthly principal and interest payments from the borrower. 1. Identify Your Strategy: Performing vs. Non-Performing

The type of bank note you target dictates your workload and potential return.

: Banks often sell these at a steep discount (e.g., buying a $100k loan for $20k) to remove toxic assets from their balance sheets and free up lending capacity.

: You can profit by restructuring the loan (loan modification) to get it performing again or by foreclosing to take ownership of the underlying property. 2. Sourcing Bank Direct Notes What to Consider When Buying Real Estate Promissory Notes

: These are "distressed" loans where the borrower has fallen behind on payments for 90 days or more .

: These are loans where borrowers make on-time payments. They provide immediate, passive cash flow with lower risk.