Note & Trust Deed Basics

Note investing is buying a contract that promises to pay you a stream of payments.  To keep things simple, although there are hundreds of kinds of notes,  we specifically specialize in notes secured by real estate.

The Trust Deed or Mortgage is the security instrument that gives the investor “collateral” .

We like secured notes because you have a degree of safety if you are smart.  You have recourse to sell the collateral to protect your investment if the payments aren’t payed to you as agreed.

Below are some handy definitions used in the industry:

Performing notes:  They are by definition a note where the borrower is making payments on the note as agreed.

Non-performing notes: These are notes where the borrower is not paying according to their agreement & in many cases are in default.

BPO: Brokers Price Opinion-an opinion of property value from a real estate broker.  This differs from a full appraisal used by lending institutions.

FMV: Fair Market Value- an opinion of value if marketed properly to the general public

ITV%- Investment to value-typically expressed as a percentage. How much an investor would pay for a note as a percentage of the value of the asset.

UPB: Unpaid balance – the remaining balance due on the note that the borrower owes the lender