How to Invest in Mortgage Notes (Even If You’re Just Getting Started)

You’ve probably heard of flipping houses.
But what if you could flip the debt instead?

That’s what note investing is all about. And for more and more investors, it’s becoming the smarter, more passive way to profit from real estate — without actually owning any property.

Let’s break it down.

What Are Mortgage Notes?

A mortgage note is the document that spells out the terms of a home loan — who owes what, how much interest they’re paying, when payments are due, and what happens if they stop paying.

But here’s the key:
You can buy that note.

When you invest in a mortgage note, you’re basically stepping into the shoes of the bank. You now have the right to receive payments from the borrower. If they pay on time, great — you collect cash flow. If they don’t, there are still ways to profit.

There are two main types of notes:

• Performing Notes: The borrower is making regular payments

• Non-Performing Notes: The borrower has stopped paying

Each has its own strategy and risk profile, but both can be incredibly profitable when done right.

Why Invest in Mortgage Notes?

Here’s why so many investors are making the switch:

• Cash Flow Without Tenants: You’re not managing property — you’re managing payments

• Discounted Assets: Many notes can be purchased for less than the remaining balance

• Collateral-Backed: The property still secures the note

• Exit Flexibility: You can flip, hold, restructure, or resell the note

• Truly Passive Potential: Especially when serviced properly

If you’ve ever wanted the income of real estate without the headaches, this is it.

How to Invest in Mortgage Notes (Step-by-Step)

Here’s what it really looks like to get started:

1. Learn the Process

This isn’t a stock you can blindly buy. Education matters. That’s why most serious investors begin with training — it shortens the learning curve and helps avoid costly mistakes.

2. Decide on a Strategy

• Want steady income? Start with performing notes

• Want bigger upside and are okay with a little work? Look at non-performing notes

3. Source Notes

You can find notes through brokers, exchanges, hedge funds, or private sellers. A good network helps here.

4. Perform Due Diligence

You’ll need to review:

• The borrower’s payment history

• The property securing the note

• The terms of the loan

• The legal documentation
  This step is where good investors make their money.

5. Close the Deal

Just like buying a house — except you’re buying the paper behind it.

6. Manage or Outsource Servicing

A licensed loan servicer collects payments, manages communication, and handles compliance. You stay hands-off.

7. Choose an Exit

• Collect payments

• Rework the loan

• Sell the note

• Take back the property (if it defaults)

You’re in control of the outcome.

From Zero to $6,000 Monthly Note Income in 6 Months

When Emily and Adam first discovered NoteSchool, they were facing a major income disruption and needed a solution fast. They had no prior experience in note investing, but they were coachable, action-oriented, and determined to make it work.

They started with NoteSchool’s training and were drawn to the power of partial notes — a strategy that allows investors to put in less capital while still generating strong future returns.

Within their first month, they invested just $1,000 in a partial note deal with over $30,000 in future cash flow. That small first step snowballed.

By month three, they had closed five partial deals, invested a total of $5,000, and secured over $150,000 in future income. By month six, they were generating $6,000 a month in note income.

Their secret? They implemented the strategies immediately, leveraged the “Martha Model,” and used NoteSchool’s done-for-you services to avoid getting stuck in the weeds.

Today, they’re growing their portfolio and have more financial freedom than ever — all by flipping the debt instead of the house.

What Are the Risks?

Every investment has risks — and note investing is no exception. The biggest ones include:

• Overpaying for a note

• Missing key documentation

• Unexpected property issues

• Legal or servicing mistakes

Most of these can be avoided with education, guidance, and proper due diligence.

Ready to Start? Here’s What We Recommend

Most people don’t grow up dreaming about buying mortgage notes — but once you understand how they work, it’s hard to ignore the upside.

Whether you want extra monthly income, a retirement strategy, or a full-blown investing business, note investing offers a path that fits.

Start by learning how it works.
Build a network.
Get support.
And move at your own pace.

You don’t need to own property to profit from real estate.
You just need to understand the paper behind it.

Everyone learns differently – so we make it easy.
Here are four ways you can start learning how to buy your first mortgage note: