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Investing In Mortgage and Trust Deed Notes
Want to Learn More?
At Paper Assets Capital, we are always prepared to accept your comments. However, if you have specific questions about any of our products we want to hear from you. If you are considering an investment, whether through individual notes, fractionalized investments or fund investing to help your overall portfolio, we want to help you meet all of your goals. Simply call us today at (888) 507-7220 ext. 103 and speak with our Investor Relations department or fill out this convenient form. We know a well-informed investor is our best client and we’re here to help.
At Paper Assets Capital, we are always prepared to accept your comments. However, if you have specific questions about any of our products we want to hear from you. If you are considering an investment, whether through individual notes, fractionalized investments or fund investing to help your overall portfolio, we want to help you meet all of your goals. Simply call us today at (888) 507-7220 ext. 103 and speak with our Investor Relations department or fill out this convenient form. We know a well-informed investor is our best client and we’re here to help.
Funding with Retirement Accounts
Some people prefer to use readily available cash for note investing such as a matured CD or bond. Others prefer to take advantage of the benefits of note investing in their retirement accounts. Not only do these notes often offer higher returns on investment (ROI), they also offer you the ability to take advantage of these returns in a tax-sheltered retirement account.
Some people prefer to use readily available cash for note investing such as a matured CD or bond. Others prefer to take advantage of the benefits of note investing in their retirement accounts. Not only do these notes often offer higher returns on investment (ROI), they also offer you the ability to take advantage of these returns in a tax-sheltered retirement account.
Fund Investing
Another option for Investors is fund investing which still is a pooling of capital from many investors. The difference between the Fund and a fractionalized investment is there is a Fund manager who makes decisions about the properties involved. In addition, it also solves one of the problems of individual investments: Diversity. Multiple Investors can purchase shares on multiple notes which diversifies not only the risk but also the reward. Interest earnings in this case are credited to the fund and each Investor is credited with their proportionate share which may be reinvested or paid out as per the Investor’s instructions. Investors never have to worry about coming up with liquid cash to purchase new notes, or dealing with properties that are in default since a fund manager deals with all of these issues. Additionally, an Investor never has to worry about buying a single note on his/her own. The best part about investing in a fund is Investors can participate with a smaller amount of capital, still get the diversity they demand and have the ability to have some amount of liquidity. Investing through retirement accounts including pension plans, 401(k)s and trust funds is also easier when you are dealing with a fund or private lending versus individual notes. |
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Purchasing Individual Notes
In some cases, our Investors prefer to take on the full risk of a note. This is done when they fund the purchase of a note on a specific piece of property. Their return on the investment occurs when borrowers make payments on their promissory note. One of the reasons so many Investors prefer this type of investment is they are not sharing profits with any other Investor. Additionally, this option allows for some flexibility. Buyers may purchase partial notes offering income over a span of time from 5 to 15 years or they may elect for a shorter-term investment of as little as six months.
The biggest challenge with investing in singular notes is diversity, or more specifically, the lack thereof. Investors stand a bigger chance of losing out on some income simply because if the borrower defaults, they may lose the entire benefit of the note. This is why many Investors prefer to invest into a Fund (of notes) because the risk is spread out over many notes.
Whole trust deed investments also require an Investor to have ready-cash available to fund a full loan versus combining it with other investors to invest in a larger note. However, some investors practice what we call “fractionalized investments” where they team up with other investors, pool their funds and purchase larger notes.
The reasons for fractionalized investments are very evident: for example, if you had a $2 million dollar note for a single borrower and found 19 other investors, each investor would only be contributing $100,000 to the overall note. This minimizes risks and allows each investor to be partially vested in the overall promissory note and allow each of them to claim 10% of the profit. This type of investing allows those with less liquidity to participate in a note. Keep in mind these investments are not without their issues. In some cases, disputes may occur between the investors when it comes to disposition of the property. Because each Investor owns a “piece” of the note, an agreement must be reached between all parties regarding what steps to take in the event of a default.
In some cases, our Investors prefer to take on the full risk of a note. This is done when they fund the purchase of a note on a specific piece of property. Their return on the investment occurs when borrowers make payments on their promissory note. One of the reasons so many Investors prefer this type of investment is they are not sharing profits with any other Investor. Additionally, this option allows for some flexibility. Buyers may purchase partial notes offering income over a span of time from 5 to 15 years or they may elect for a shorter-term investment of as little as six months.
The biggest challenge with investing in singular notes is diversity, or more specifically, the lack thereof. Investors stand a bigger chance of losing out on some income simply because if the borrower defaults, they may lose the entire benefit of the note. This is why many Investors prefer to invest into a Fund (of notes) because the risk is spread out over many notes.
Whole trust deed investments also require an Investor to have ready-cash available to fund a full loan versus combining it with other investors to invest in a larger note. However, some investors practice what we call “fractionalized investments” where they team up with other investors, pool their funds and purchase larger notes.
The reasons for fractionalized investments are very evident: for example, if you had a $2 million dollar note for a single borrower and found 19 other investors, each investor would only be contributing $100,000 to the overall note. This minimizes risks and allows each investor to be partially vested in the overall promissory note and allow each of them to claim 10% of the profit. This type of investing allows those with less liquidity to participate in a note. Keep in mind these investments are not without their issues. In some cases, disputes may occur between the investors when it comes to disposition of the property. Because each Investor owns a “piece” of the note, an agreement must be reached between all parties regarding what steps to take in the event of a default.
