This article is presented by Connect Invest.
Missed the last housing cycle? You’re not alone. Pending home sales fell by 0.4% in July, continuing a three-year trend of slugging along. And it’s not likely to change anytime soon—there are 36% more sellers than buyers, the largest gap since records began in 2013.
With a buyer’s market looming and uncertainty that it will get better anytime soon, plenty of investors are parking capital, but that doesn’t mean it has to sit idle. There are investment vehicles offering predictable returns, asset-backed security, and low minimums without the friction of traditional ownership. Some of those, like real estate-backed notes, make it easy for your cash to get a higher return than if you put it in a savings account.
What Are Real Estate Notes?
A real estate note is simply a document indicating a debt, like an IOU for financing real estate. When a borrower takes out a loan and agrees to the payment and interest terms, these notes are created. The lender then sells these debt instruments to investors, who can collect the payment until it is paid off.
There are different types of real estate notes, including first-position and second-position liens, which indicate how secure the note is and who gets paid out first.
Why Invest in Real Estate Notes?
Investing in real estate notes might make sense for several reasons. For one, it allows you to earn a passive income stream. All you have to do is buy the note, and you are entitled to the payments.
It’s also hassle-free, as you don’t need to manage a property. But you get the advantage of diversifying your investments with exposure…