A Good Time To Invest In A Mortgage Note?

By Author: Alan Noblitt
Total Articles: 11
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Ever since 2005, I've advised friends, colleagues, and anyone else who would listen to not buy any real estate. Although I make no claims to uncommon brilliance or being able to see the future, I am an information junkie. When I looked past all of the happy talk newspapers and checked the real data, there was no way that property values could go anywhere but down. Nobody could know exactly the timing or the sizing of the collapse, but I knew that it would be huge. The level of incompetence among regulators and greed among bankers made the crash worse than most anyone expected.

These are tough times for anyone with money to invest. The stock market has been quite volatile and recently declining, so buying stocks feels like wagering in Las Vegas. Savings accounts, CD's, and other safe interest-bearing accounts pay close to nothing for holding your money. All actions from the Fed show that they want to keep rates low, and to heck with those who save money.

So how about buying a house either to live in or as a rental? For the former, the financial part is only part of the decision, as you'll naturally ...
... want to consider neighborhood quality, school district, access to interesting places and shopping, etc. On the positive side for buying a house is that housing prices are much lower than they were in 2006 and that interest rates are at record lows. The negatives for house buying are that prices in most areas will continue to go down (in my opinion) and that the economy is rapidly becoming a horrible mess.

For investors, buying a house has some of the same issues. One big plus though is that rents are slowly rising and vacancies declining in a lot of markets. With banks keeping lending tight and fewer Americans thus qualifying for loans, this would logistically lead to a greater need for apartments.

One of my favorite other ways to buy real estate is with mortgage notes. I've written numerous articles in the past about how to buy a deed of trust note (a.k.a. mortgage note). Note buyers like me have always been careful to diligently check documents, property condition, payer credit, etc. before buying a note. These days, we have to make educated guesses about where the real estate market is headed and what government regulations and policies will creep into the mix. Being a mortgage buyer has never been more challenging.

For most investments in real estate and elsewhere, these are such dangerous times that you have to understand your down-side risk. If the value of your investment went down, you need to still be able to pay your bills and keep food on the table. My research and gut instincts tell me that these tough times will be with us for several years, so plan carefully.

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