Most real estate investors have heard of the “Note Business” but many misunderstand it while others think that it is completely separate from the real estate business. The fact is, most real estate investors are in the note business, and they just don’t know it. The note business is the financing side of the real estate business.

Note Business in the Simplest Terms

The note business is based upon the purchase, sale and assigning of two documents: the promissory note and the mortgage agreement. These two documents represent a promise to pay and a solution for non-payment.

Note = Promissory Note = IOU (I Owe You)

Mortgage = Collateral Agreement = Foreclosure Agreement

When someone borrows money to purchase real estate, they have to sign an agreement to promise to pay it back. This agreement also outlines the terms of the payback. This written promise is not enough to get a loan. This promise must be backed by collateral of value, which is typically the real estate itself. The collateral agreement pre-authorizes the foreclosure of the property if the debt is not paid according to the promissory note. Read More→