As shown in the chart above, there are three critical factors (knowledge, interest, and time) which contribute to a real estate investor's success.  Based on these factors an investor can decide how to enter the notes investing space.  For most investors, investing in notes is a fairly new concept and Wood Street Academy is there to help by offering a tiered approach to learning, starting from providing self-study resources all the way up to one-on-one coaching. We can fill your educational gaps to a standard required for investing as an Active Investor (see below). Please visit our Education page for more information.

Active Investor
This option is for a notes investor who has the proven experience and/or knowledge to not only make the purchase but perform the loan workout(s) totally on their own.  You buy the distressed asset(s), and transfer them to your loan servicer or retain the current servicer to avoid interruption with the asset.  This option is NOT recommended for those who are fairly new to this space.

Semi-Active Investor
This level of participation is the most common, whereby the asset(s) is purchased either on your own or with Wood Street in a joint venture agreement.  If purchasing on your own, you then enter into an asset management service contract with us and leverage Wood Street's wide range of expertise and resources.  We identify your goals (e.g. cash flow, property ownership, etc.), manage the process, and consult with you while you make the decisions and learn as you go.

Think of us as your General Contractor overseeing the rehab of a house:  managing the electricians, plumbers, pulling permits, arranging insurance, finding/interview tenants, property management, etc..  In the case of asset management of notes, we do the following tasks (among others):

  1. Evaluate the property(s)
  2. Evaluate the quality of the note itself by performing extensive due diligence procedures
  3. Interface with various servicing companies such as: loan servicers, property preservation companies, attorneys, borrowers, title companies, etc. all of whom have been vetted and highly recommended.

Passive Investor
Investors who prefer to be involved only on a minimal basis can still enjoy higher rates of return (vs. traditional investment options - mutual funds, stocks/bonds, CDs, checking accounts) in a variety of ways. 

One popular vehicle is investing in a fractional ownership funds or private equity fund offering.  You can receive a guaranteed rate of return, remain hands-off while the work is done for you, and stay informed with detailed monthly investor reports. Most of these opportunities require that you be an Accredited Investor, but there are other opportunities that don't, and Wood Street can leverage its extensive network to locate those to fit your particular investment profile.

Another secure option is purchasing what's known as "Performing notes", which simply means, mortgages where the payment history is current, on-time, and not in default.  These notes also yield high rates of return and are secured by real estate, which is much safer than any Wall Street investment!

Still other options exist such as the following:  

  1. Private Lender (debt partner lends funds at a specific interest rate)
  2. Joint Venture (equity partner lends funds but participates in ownership and profit yields)

Or, you can hedge yourself by participating in any combination of these opportunities!

As depicted in the illustration, home buyers (at top left) normally obtain loans (mortgages) in order to purchase their homes and in turn, offer the deed as "collateral". If payments fall behind and go into "default", the promissory note (the mortgage) allows for the lender to legally reclaim the deed to the property (i.e. foreclose) if need be.  

In an effort to recover from the housing crisis of the late 2000's, instead of pursuing costly foreclosures (currently up to $50,000 for financial institutions), banks are now packaging large "pools" of loans and selling them to get them off their books.   Even institutions such as Freddie Mac, Fannie Mae, and HUD are using this method to reduce their "shadow inventories" - mortgages in default that banks have not foreclosed on.  Private investors can take advantage of this condition, given that the average cost to foreclose (for a private investor) is only around $3-5,000! 


Financial institutions sell their pools of loans to smaller institutions, more commonly hedge funds or private equity funds.  These companies will strip off assets they prefer to keep in house and sell off the remainders to other companies like Wood Street, or private investors.

Once Wood Street, or you, the private investor, purchases a distressed mortgage, a number of workout arrangements with the homeowner can be pursued.  If none of these efforts are successful, next steps are to pursue a short sale, deed-in-lieu (of foreclose), or ultimately foreclosure itself.  Once a property has been deeded back to the investor, you again have a number of options to choose from including renting the property, flipping to a rehabber, selling either with owner financing, 203k mortgage vehicle or to a buyer using an institutional lender.  If owner financing is chosen, then the investor has the additional options of selling the new mortgage to another investor, or selling what's known as a partial - a certain number of payments while collecting the remaining payments later.


Over the years, Wood Street has compiled a list of reputable business with whom we do business, and offer high-quality notes.  Companies we deal with have been highly recommended and vetted by our various industry partners.  we've met a number of them face-to-face at various networking and training events around the country.  While there are plenty of notes to be found in groups forums on sites such as Linked In and Facebook, buyer beware!  This business can be very tricky and buying from a company you are not familiar with can lead to disastrous consequences.

how can i get access to notes?

INVESTORS - get your most basic questions answered here!

  • Educational opportunities
  • Joint Venture opportunities
  • Asset Management
  • Notes Brokerage
  • Private Placement Research & Consulting
  • Realtor & For Sale By Owner solutions
  • HAMP loans beginning to reset (after five years) to higher adjustable rates
  • Easing of qualifying FICO scores – some have dropped to 580
  • 46% of current FHA loans exceed the 43% debt-to-loan limit ceiling
  • FHA is now selling NPNs vs. REOs (shadow inventory); Fannie Mae, Freddie & banks to follow

WHY notes?

  • To diversify your investments for additional streams of revenue; buy notes using your Roth IRA for huge tax-free earnings
  • Take advantage of the growing inventory of non-performing mortgages; retire from landlording, tenants, toilets and trash
  • Notes have a greater number of exit strategies vs. traditional real estate, where potential earnings are only made from appreciation (negligible in today's market), cash flow from rentals, tax savings, and the eventual sale of the property.
  • Leverage existing relationships to create win-win situations for you, Wood Street, financial institutions, and homeowners in default, and the affected communities
  • Achieve additional passive income through re-performing mortgages and new mortgages created via owner financing of REO properties.  This was once thought to be a limited sector where the maximum profitability period would be achieved over the next 5-7 years, but now the non-performing mortgage space is expected to increase substantially at least over the next 10 years due to several factors, among them:

frequently asked questions

1. Are the prices negotiable? 

2. Can I view the properties? 

3. What happens during the due diligence period? 

4. What if I discover something I don't like before closing?

5. What is the timeline of events for a typical sale?

6. How do you make money on these?

1 - Yes, bids are taken when the tapes are released and sellers are open to some negotiations.  They are more open to negotiating if multiple loans are purchased rather than just one offs.  Usually a deadline is set for all bids.  They will agree to a price before the deadline if a suitable offer is accepted.

2 - You can do drive-bys but cannot enter the properties since they are still owned by the borrower not the mortgage holder.  Even after purchase you're not "legally" allowed to enter (until you have the deed), except for securing the property, winterizing, adding a tarp on the roof, etc.  BPOs are heavily relied upon in the notes space, along with contacting local agents and others in that particular area.  If a house is vacant then it's up to you to use your own discretion.

3 - During the due diligence period, background research is done on a number of items related to the mortgage.  Things like reviewing the BPO, analyzing O&E reports for chain of title, assignments of mortgages, state/county/city taxes, any liens and their status, rent comps, crime stats if not familiar with the area, bankruptcy status (if applicable), foreclosure state laws, super lien states, hardest hit fund states, etc.  This is where you'll form your exit strategies (covered in answer #6).

4 - Generally you have around 48-72 hours to wire the funds once a price has been negotiated and the purchase agreement completed, so there's not a lot of lag time to dwell on the purchase.  It's expected that you've done all due diligence before submitting an offer (ordering additional BPOs and/or title abstract reports if desired).  To be honest, this industry frowns on reneging on offers and will often not deal with folks anymore once they do, so it's best to have done due diligence and be as informed as possible.  This space deals in business to business transactions, not homeowners with consumer protection laws to account for.

5 - We covered most of this in the previous answers.  After the sale, the time frame for action is totally up to you since you're "the bank" at this point.  There are a few things you'll want to do upfront though, including deciding who will house your collateral files (original loan documents) and service your loan, as well as getting a forced place insurance policy on the property (to insure your investment).  The file can take up to 2-3 weeks to be sent, during which time a goodbye letter will be sent from the previous loan servicer to the borrower.  Once your servicer has a copy of the collateral file, they will "scrub" it to ensure that everything was included, then they will "board" the loan (set it up for servicing, i.e. accepting payments on your behalf).  They will then send a "Hello" letter to the borrower, informing them to send payments to them from now on.  These letters have to be sent by law, and you cannot contact the borrower until 15 days after the Hello letter has been sent - the loan servicing companies know this and will not make any attempts to start contacting them until after that time.  

6 - There are many exit strategies at your disposal with NPN (non-performing notes).  Typically the workouts follow this general path:

If the house is occupied, find out if the owner wants to stay and determine if a loan mod is feasible (based on your own loan requirements - you set the rules here).  If it's in a Hardest Hit Funds state, you would work with the homeowner to apply for HHF assistance, whereby the state would reimburse you (up to $30K in some states) for lowering the balance of the loan and sometimes paying the newly adjusted mortgage on behalf of the homeowner for up to 18 months.  You may both agree to a short sale of the property if you want a quick exit.  If a workout is not possible or the homeowner isn't responding, a deed in lieu and/or foreclosure is the next line of action. 

Once you have the deed, as another quick exit option, you can wholesale the property if you don't want to rehab it (to sell or rent).  

You can also sell as-is to a 203K loan qualified person and still get market value for the property.  

Some investors are loading their properties with tenants, then selling at a higher price (to out of town cash buyers) based on the income valuation approach, not based on fair market comps.  It's called the 50/50 Model and we can discuss more in depth later if you're interested, but basically a buyer puts 50% down then you finance the other 50% over 5 years.  The payments will come from the rents so the buyer actually buys the house for "50% off" and owns it free and clear in 5 years.

But the way to really leverage your investment is to sell with owner financing with a 10, 20, or 30-year mortgage.  If you pull up a mortgage or amortization schedule calculator, you'll see how much passive income you could collect over the life of that mortgage, without ever having to deal with one tenant or toilet.  Once the loan is seasoned you could sell the mortgage to another investor, or sell only a number of payments (called partials).  For example, you would sell 10 years of payments to an investor for a lump sum, then receive all of the backend payments after that 10 year period.