Most real estate investors start by thinking about rental properties, flips, or apartment buildings. But there’s another side of real estate investing that often flies under the radar: note investing.
In this episode of The Real Estate Investing Club Podcast, host Gabe Petersen sits down with Eddie Speed, founder of NoteSchool, to break down how investors can profit by becoming the bank instead of the landlord.
After completing more than 50,000 note transactions over four decades, Eddie shares why note investing is becoming increasingly attractive in today’s high-inflation, high-interest-rate market.
Quick Answer: What Is Note Investing?
Note investing is the process of buying mortgage notes or seller-financed loans secured by real estate, allowing investors to collect monthly payments like a bank instead of managing tenants and properties. In 2025, many investors are shifting toward notes because they can generate 8-10% yields with fewer operational headaches than traditional rentals.
According to Eddie Speed:
“It’s way better to be the bank right now than it is other things.”
That shift is happening because many landlords are facing rising insurance costs, maintenance expenses, taxes, and shrinking cash flow—while note investors simply collect payments.
What Is a Real Estate Note and How Does Note Investing Actually Work?
Quick Answer
A real estate note is a legal agreement where a borrower promises to repay a loan secured by real estate. Note investors purchase these loans and collect the monthly payments, stepping into the role traditionally held by banks.
Most people already understand notes without realizing it.
As Eddie explained:
“You’ve been to a title company and signed a note when you bought a piece of property.”
When someone buys a home using financing, they typically sign:
- A promissory note (the promise to repay)
- A mortgage or deed of trust (secured by the property)
Those notes can later be sold.
That’s why homeowners often receive letters saying:
“Your loan has been sold.”
Banks do this constantly. But individual investors can do it too.
Instead of owning the property itself, note investors own the debt attached to the property.
This creates a fundamentally different investment model:
| Rental Property Investing | Note Investing |
|---|---|
| Owns the property | Owns the loan |
| Manages tenants | Collects payments |
| Handles maintenance | Uses loan servicers |
| Variable cash flow | Predictable monthly income |
| Operational headaches | Passive debt ownership |
This strategy has become especially attractive in today’s market where operational costs continue climbing faster than rents.
For investors exploring alternative financing structures, check out this guide on creative seller financing strategies.
Why Are More Investors Choosing Notes Over Rental Properties?
Quick Answer
Many investors are moving into note investing because notes can generate strong yields with significantly fewer management responsibilities than rentals.
Inflation changed the economics of rental property ownership.
Insurance costs increased.
Repairs became more expensive.
Property taxes climbed.
Labor costs surged.
But rents did not always rise enough to offset those expenses.
That created pressure on landlords.
Meanwhile, note investors continued collecting fixed payments every month.
Eddie explained the difference clearly:
“The bank gets paid first.”
That priority position matters.
A landlord only profits after:
- Maintenance
- Taxes
- Insurance
- Vacancy
- Repairs
- Property management
- Utilities
But the lender gets paid first every month.
According to Eddie, many note investors today are earning approximately 10% yields with fewer operational headaches than traditional rentals.
He contrasted it directly:
“I can be the bank and make eight or 10% interest, and I can be a landlord on a rent house and make 4% interest.”
This trend aligns with broader changes across the industry, including rising interest in:
- Seller financing
- Creative finance
- Private lending
- Debt investing
- Mortgage-backed strategies
You can also explore how investors are using financing strategies in other asset classes like:
Where Do Note Investors Find Notes to Buy?
Quick Answer
Most individual note investors buy notes from real estate investors who create seller-financed loans rather than directly from banks.
This surprises many people.
Most investors assume note investing means buying distressed bank debt.
But Eddie explained that much of today’s opportunity comes from relationships with real estate investors.
Specifically:
- Seller-finance investors
- Property flippers
- Creative finance operators
- Real estate entrepreneurs
These investors often create seller-financed notes and later sell them for liquidity.
Eddie described his business as highly relationship-driven:
“I’m involved in the process with them even before they create the notes.”
That creates a win-win ecosystem:
- Investors create notes
- Eddie helps structure them
- The notes later become investment products
This is closely connected to strategies like:
- Seller financing
- Wholesaling
- Off-market acquisitions
- Creative deal structuring
For deeper reading:
How Do Note Investors Evaluate Risk Before Buying a Note?
Quick Answer
The most important part of note underwriting is determining whether the borrower can and will continue making payments consistently.
According to Eddie, underwriting comes down to two questions:
- Can they pay?
- Will they pay?
The first focuses on:
- Income
- Financial capacity
- Employment
- Stability
The second focuses on:
- Payment history
- Credit behavior
- Borrower reliability
Eddie emphasized that he is not trying to acquire problem properties.
Instead, he wants stable borrowers attached to quality collateral.
He explained:
“I’m looking for a winning story.”
That means:
- Good neighborhoods
- Stable homes
- Responsible borrowers
- Sustainable payment structures
He specifically avoids “junkie collateral.”
In his words:
“I don’t buy notes on junkie collateral.”
That philosophy mirrors what experienced real estate operators often discover across multiple asset classes:
cheap properties frequently create expensive problems.
What Loan-to-Value Ratios and Returns Do Note Investors Target?
Quick Answer
Most professional note investors maintain conservative loan-to-value ratios and prioritize stable monthly cash flow over massive discounts.
Eddie explained that his team typically funds no more than 80% of a property’s value.
For example:
| Property Value | Maximum Note Exposure |
|---|---|
| $300,000 | ~$240,000 |
That creates a protective equity cushion if problems arise.
Interestingly, Eddie said beginners often misunderstand note pricing.
Many assume note investors buy loans at huge discounts.
But according to Eddie:
“Buying notes at giant discounts means that somebody probably has something problematic.”
Instead, experienced note investors prioritize:
- Payment stability
- Reliable borrowers
- Good collateral
- Long-term performance
His investors typically target:
- ~9-11% annual yields
- Predictable monthly income
- Lower operational risk
That balance of income and stability is attracting more investors seeking alternatives to highly leveraged rental ownership.
For additional context on underwriting and financing structures, this guide on real estate portfolio building offers broader investment strategy insights.
How Passive Is Note Investing Compared to Rental Ownership?
Quick Answer
Note investing can become highly passive when investors use professional loan servicing companies to manage collections and borrower communication.
One major misconception about note investing is that investors personally manage collections.
In reality, most experienced investors use third-party servicers.
Loan servicers typically handle:
- Payment collection
- Escrow management
- Late notices
- Borrower communication
- Compliance documentation
The investor still controls major decisions, but daily operations are outsourced.
Eddie explained:
“The technical aspect of reaching out to the borrower… the servicer is going to do that.”
This creates a much more passive experience compared to:
- Tenant calls
- Plumbing emergencies
- Roof repairs
- Vacancy turnover
- Property management issues
That’s one reason many investors are increasingly exploring debt investing instead of active property operations.
What Can New Investors Learn From Eddie Speed’s 40+ Years in Real Estate?
Quick Answer
Focus, specialization, and relationship-building were the three biggest drivers behind Eddie Speed’s long-term success.
When Gabe asked Eddie what advice he would give his younger self, his answer was immediate:
“Focus.”
He warned against constantly chasing shiny objects.
Instead, he emphasized mastering one strategy deeply.
That specialization helped him become nationally recognized in seller financing and notes.
Gabe highlighted an important lesson from that approach:
“If people know that is what you buy… that is who you are… they’re going to start bringing that thing specifically to you.”
This applies across all real estate niches:
- Self-storage
- RV parks
- Mobile home parks
- Syndications
- Seller financing
- Notes
The investors who build the strongest businesses often become known for one thing first.
Eddie also strongly recommended joining masterminds and surrounding yourself with experienced operators.
Groups he mentioned included:
- Collective Genius
- Boardroom Mastermind
That emphasis on relationships mirrors the broader philosophy behind The Real Estate Investing Club Podcast itself.
How Is AI Changing the Future of Note Investing?
Quick Answer
AI is dramatically improving underwriting, due diligence, document processing, and loan servicing efficiency within the mortgage and note industry.
Eddie revealed that his technology partners use AI systems capable of reading:
“200,000 documents an hour.”
That level of automation is transforming:
- Due diligence
- Compliance review
- Loan analysis
- Servicing operations
Even more interesting, Eddie said his company is working toward selling mortgage investments on blockchain infrastructure.
That could eventually allow investors to purchase fractional interests in mortgage notes much more efficiently.
According to Eddie:
“Mortgages are going to be a very viable way that blockchain… people can buy a piece of an interest in that mortgage and they just get a check every month.”
As technology improves, note investing may become far more accessible to everyday investors.
Final Thoughts: Is Note Investing a Good Strategy in 2025?
Quick Answer
For investors seeking predictable income, reduced operational stress, and strong risk-adjusted returns, note investing may be one of the most overlooked opportunities in real estate today.
The biggest takeaway from Gabe and Eddie’s conversation is this:
You do not have to own properties to profit from real estate.
You can own the debt instead.
And in today’s market, many investors are discovering that being the bank can be simpler, safer, and more profitable than being the landlord.
Especially when:
- Inflation remains elevated
- Expenses continue rising
- Interest rates stay high
- Operational headaches increase
As Eddie put it:
“I’m looking for people that have good loans.”
Simple.
Consistent.
Predictable.
That mindset has helped him complete more than 50,000 note transactions over four decades.
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