Real estate investing does not always mean buying rental properties, managing tenants, or dealing with late-night maintenance calls. In this episode of Trust This, Attorney Joe Seagle introduces viewers to the world of note investing, a strategy that allows investors to generate income by purchasing promissory notes and mortgages secured by real estate. These opportunities often come from homeowners who sold property using seller financing or from private and hard money lenders looking to convert future payments into immediate cash. Instead of owning the property itself, investors receive monthly payments while maintaining the security of a mortgage lien against the real estate.
Joe explains why many investors view mortgage note investing as an attractive alternative to traditional real estate ownership. Because the investment is secured by real property, note holders may have the ability to foreclose and take ownership of the property if the borrower defaults. He emphasizes the importance of proper due diligence, including verifying title, reviewing mortgage documents, and ensuring the note is secured by a first-position mortgage whenever possible. Joe also encourages aspiring note investors to connect with their local Real Estate Investors Association (REIA) to learn from experienced investors, find note-buying opportunities, and better understand how to evaluate and price notes.
A key focus of the episode is how Florida Land Trusts can be used to hold mortgage notes privately through a specialized Mortgage Holding Trust. Under Florida law, a land trust can hold not only real estate but also interests in real estate, including mortgages. By transferring the mortgage and promissory note into a trust, investors can keep their names off public records while retaining control of their investments. This added layer of privacy can help reduce unwanted solicitations from buyers, brokers, and marketers who frequently target note holders identified through public records.
Joe also discusses the practical side of managing note investments. Investors can choose to service the notes themselves or work with professional loan servicing companies that handle payment collection, accounting, amortization schedules, payoff statements, and loan satisfactions. Combined with the privacy benefits of a land trust, professional servicing can create a more passive investment experience while allowing investors to focus on growing their portfolios. If you’re interested in note investing, asset protection, Florida Land Trusts, or alternative real estate investment strategies, watch the full episode of Trust This with Attorney Joe Seagle to learn how Aspire Legal Solutions and MyLandTrustee help investors structure and protect their investments for long-term success.
Did you know that another way that you can make money in real estate doesn’t require that you buy and hold or buy and flip real estate at all?
Hey, I’m Joe Seagle, real estate and asset protection attorney here in Florida. And we work with investors all the time who are always looking for other ways to get into real estate without having to own real estate. Because sometimes, let’s just face it, dealing with tenants is a hassle, even if they’re commercial tenants. So, what a lot of our clients are doing is they actually invest in promissory notes or they buy promissory notes and mortgages. This may come from sellers who sold their home on a seller-held note and they want to get their cash out of it now rather than waiting for the payments to come in over time. Or they may be a private or hard money lender who has promissory notes and mortgages out there where they’re collecting payments and they need to go ahead and convert the payments into cash now, so they’ll sell the promissory note.
It’s a great way to invest in something that has a lien on real estate. You want to make sure it’s a first lien, by the way, on the real estate. So in case you have to foreclose, you will take the real estate back rather than cash. And you are getting a monthly set amount of money coming in at an interest rate. So they’re typically pretty safe investments.
Now, this isn’t investment advice. This is more legal advice. Because a lot of people go, “Okay, but how do I do it?” Well, there are several ways to get into note buying. Number one, I would recommend that if you are not a member of your local Real Estate Investors Association, join. Because you’re going to meet a lot of people there who may be holding notes, who are selling notes, and other people who buy notes. They’ll understand the process and they can teach you how to do it because there’s a lot that goes into valuing those notes and making sure that you’re not paying too much for them.
You also want to make sure that you’re getting a really good secure deal, making sure that the mortgage is right, the title is right, everything is good, and that you are getting all the paperwork right to get it in.
Now the next question is, “How do I hold that? Do I form an LLC to buy the promissory notes, or do I use a trust?” And this is where this actually came up because recently we had someone ask us, “How would I use a trust to buy notes?” And it’s actually very easy.
Under Florida Statutes 689.071 and 689.073, we have the Florida Land Trust. A lot of people think, “Well, it’s only used to hold real estate, to hold vacant land or buildings or houses or something like that.” But that is not the case. It’s actually designed to hold any interest in real estate. And a mortgage is an interest in real estate.
So we’ve always taken the position that you can form a land trust to hold a mortgage and the note that goes along with that because the note follows the mortgage and vice versa.
We can form those trusts for you. We do that all the time. It’s called a Mortgage Holding Trust. You can hold as many mortgages in a trust as you want to. We do have an affiliated company that will hold the mortgage and the note in trust. So our name is what appears on title rather than yours. It’s usually just a trust number that we come up with. Then you just make sure that every note is endorsed over to that trustee and every mortgage is assigned over to that trustee of that land trust so that it then holds the note and the mortgage.
The payments will still go to your servicing company or directly to you if you’re going to be your own servicer. However you want to set that up, that’s between you and the borrower, the person who’s paying the money.
Typically, there are two letters that go to the borrower. One letter is from the old lender saying, “We no longer hold your mortgage, so from this point on, send your payments over here.” Then the second letter comes from you saying, “Hello, we’re your new servicer. Send the funds to us from now on.” Once the borrower gets those notices, they’ll start sending the money to you.
But on the official records, our name appears.
As I said, you can put as many mortgages into one trust as you want because they’re usually fairly low liability. So one trust is generally sufficient to hold multiple mortgages. It keeps your name out of the public record so no one is calling you or texting you saying, “Hey, I want to buy your note,” or “Do you want to buy this note?” Instead, those inquiries come to us. They’re sending us the texts and emails wanting to buy the note or sell additional notes.
That’s a great way to hold these investments. The land trust is a little different because it includes some extra powers that are not necessarily found in a typical land trust that holds real estate. The trustee has additional powers regarding holding a mortgage, so we include those powers in the trust documents.
That’s just something to keep in mind. If you want to get into the note-buying business, it’s definitely something to think about. You don’t have to own the real estate. You’re not dealing with tenants. All you’re doing is collecting payments, making sure the insurance is paid every year, and making sure the property taxes are paid every year so that your lien remains protected.
Again, if you want to get into note buying, my first recommendation is to join your local Real Estate Investors Association and start learning about it. Then, if you don’t want your name to appear on the public records, we can establish a land trust that will hold those mortgages as you acquire them.
There’s typically nothing for the trustee to sign to accept those notes and mortgages into the trust. You can be your own servicer or use a servicing company. There are several excellent servicing companies that we’ve worked with over the years that we often recommend. They can handle payment processing, accounting, amortization schedules, payoff statements, loan satisfactions, and all the administrative details that come with servicing privately held notes and mortgages.
It’s definitely something worth considering.
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