Investing in real estate doesn’t have to be a dirty job. Here are three strategies to help hands-off investors make money from real estate.
Real Estate Notes
A real estate note is a type of promissory note such as a mortgage or deed of trust, which is secured by a real estate asset like a house. The borrower promises to repay the lender a certain portion of the debt at regularly scheduled intervals. While the original lender may be an individual note investor, usually the first lender is an institution such as a bank. Individual note investors also can purchase existing notes from banks, hedge funds, or other individual investors.
One way investors make money from real estate notes is to collect the debt payments with interest. Existing real estate notes are classified as performing or nonperforming. A performing note means the borrower is current on the note payments. With a nonperforming note, the borrower usually is at least 90 days behind in payments. A hands-off investor who is buying an existing note should purchase a performing note. Nonperforming notes are labor-intensive.
For more on publicly traded real estate investment trusts and utilizing property managers, see my full blog at http://jasoncohenpittsburgh.net/real-estate-investment-strategies-for-the-hands-off-investor/.