Learning by Experience is Tough and the Tuition is High

Being a beginner in any endeavor is always challenging. The beginning note investor has many important decisions to consider and evaluate. Investing in mortgage notes and promissory notes is profitable when done correctly. Learning to do it right, the first time, is safer and cheaper than learning by making your own mistakes. The school of hard knocks charges a high tuition.

Just like every serious activity, note investing requires preparation, education, training and experience. Obtaining these essential requirements can be costly if not done carefully. Since investing involves putting money at risk, it should be done with care and caution. It should not be done without experienced guidance. It is not recommended that it be done as “on-the-job-training” or “earn-while-you-learn”.

Investment Account Types-Tax Deferred, Tax Free and Ordinary Plans

There are many types of investment account available; each one has benefits and drawbacks. Let’s take a quick look of some of the most popular types. In the retirement account group there are:

Traditional IRAs (Individual Retirement Account) were specified deposits are allowed annually that are tax-deductable. These are invested in publicly traded assets-stocks and bonds. The distributions and withdrawals from the account are subject to taxation.
Self-Directed IRAs that invest in non-publicly traded assets such as real estate and promissory notes. The tax consequences are the same as for the traditional IRA account.
Roth IRAs can be invested in publicly traded assets or non-publicly traded assets. The tax is paid when the investment is funded; withdrawals and distributions are tax-free.
Rollover IRAs are IRA accounts receiving assets from another IRA account.
401(k) Plans are company retirement plans having government and company rules.
403(b) Tax-Sheltered Annuity Plans (TSA plan) is a retirement plan offered by public schools and
SEP Simplified Employment Plans. A SIMPLE IRA plan provides small employers with a simplified method to contribute toward their employees’ and their own retirement savings.
The Department of the Treasury, Internal Revenue Service, and the Department of Labor make the rules for all retirement investing accounts. You will need information and guidance to select the plan best for you. There are several self-directed IRA custodians and administrators that can help you. Selecting the right self-directed IRA administrator is a very important step.

After selecting the self-directed custodian/advisor and funding your plan you will be ready to start your investing experience. IRS Tax Code allows you to invest your IRA dollars in almost anything, expect life insurance and collectibles. Collectables include works of art, rugs, antiques, metals, gems, jewelry, stamps, coins, alcoholic beverages, and certain other tangible personal property.

Stocks, bonds, mutual funds, exchange traded funds, options, real estate, mortgages (promissory notes), oil, natural-gas, commodities, etc. are all approved as investment classes and are all potentially useful investment vehicles.

If using an IRA account is not right for you, consider using an ordinary bank checking account.

Investing Tips for Promissory Notes and Mortgage Notes

Investing involves performing “due diligence”; due diligence involves understanding the investment, checking out its deciding how much to invest. It’s an investigative job; here are basic steps and tips:

Don’t rush the investing process-let no one rush you into a decision

Don’t invest all of your capital into one investment

Understand the asset you are investing in

Understand how that asset will repay your investment

Understand the down-side (risk) and the up-side (gain) potentials

Understand what will happen if the investment develops problems

Understand what rules and laws govern your rights and your duties

Understand any contract or document you sign

Understand who you are doing business with

Investing Scams and Cons

The inexperienced investor can become a target for swindlers and cheats. To protect yourself you need to develop guidelines and rules.

Get rich slowly: A swindler always promises “quick profits” or “fast money”. Consider this: if “quick profits” were available, a stranger would not be offering them to you; that stranger would keep all of those “quick profits” for himself and his friends and family.

Unusually high returns-warning: All investments carry risk. Normally, high returns are created by high risk. Examples of high risk are speculative stocks, speculative real estate, speculative bonds, start-up companies, new ventures, etc. Examples of low risk investments that pay proportionately low returns are FDIC insured savings account, U.S. Government bonds, blue chip stocks and bonds, etc.

Rarely will you be able to pay a low price for a high value asset; rarer yet is when a stranger provides you with such a bargain!

Promoters and salesmen who claim loyalty to your group or your organization: The group may be your religious organization, your community volunteer organization, your school alumni organization, or any other group you like and trust. In our world of complexity, many people feel they need a quick way of deciding who to trust. Deciding who to trust takes on serious considerations in the world of investing. Investigate before investing.

Summary

Successful promissory note and mortgage note investing is a many step in this process. As a beginner or inexperienced note investor you should engage an experienced specialist to work with you and guide you initially. Investing without understanding is like playing poker without looking at the cards.

Lawrence (Larry) Tepper specializes in the valuation and appraisal of promissory and mortgage notes, and other cash-flow financial instruments nationally. Nation-wide services for banks, trust companies, self-directed IRA accounts, estates, attorneys, CPAs, and individual investors.

Consulting Services-Free Appraisal Price Quotes

EDUCATION AND TRAINING

Law Degree /Accounting Minor University of Denver

Managing Colorado Real Estate Broker– Promissory Notes Specialization

Certified Commercial Investment Member from the National Assoc. Realtors (CCIM)

PRACTICAL EXPERIENCE

35 + years of national promissory note and mortgage note appraisal and valuation for Banks, Trust Companies, Attorneys, CPA’s, Estates, Trusts, Executors, Administrators, and Financial Advisors.

“No charge” review and discussion of your file and documents–Fee appraisal quotes– Call or email.

Lawrence (Larry) Tepper