NoteRehabberese 101: The Basics of Real Estate Note Investing Lingo

Getting involved in the real estate investing industry – and note investing in particular – introduces you to a whole new world of terminology and jargon. And let’s face it…it’s not like our industry’s jargon makes a whole lot of intuitive sense.

NoteRehabber The Basics of Real Estate Investing Lingo

Note? Tape? Performing or non-performing? If you didn’t know any better, you might think we’re talking about how well you’re doing in a high school art class.

To help you get up to speed on the basics of the lingo in the real estate investing industry, we’ve put together this guide.

Real Estate Investing Lingo 101

While the real estate glossary seems unending, here are a few basic terms to know. These are the terms that are thrown about most often and will form the foundation of your understanding in the industry.

Study this list and you’ll be able to keep pace with many conversations at your next note investing or real estate investing networking event.

Note

A promissory note is basically a promise to pay the debt that someone owes money on. A mortgage, or anything that resembles a mortgage, is the document that ties the debt to the property.

“Note” is a term you’ll hear from asset managers and investors alike, but it’s likely not something the average homeowner would use.

Tape

A tape is simply an Excel spreadsheet or a list of “notes” that are available for sale and the figures that are associated with the notes. A bank, hedge fund, or individual seller will compile a tape when they’ve decided they want to selloff the assets on the list.

A note investor will request the tape and make a determination of whether to make an offer based on the numbers present. Of course, it’s important to do your due diligence on every asset you make an offer on to protect your investment.

Title or Deed

A title or deed is recorded at the courthouse and documents the legal owner of a property or the owner of legal rights on a property.

Typically when you buy a house, you get a mortgage. On the day of closing, you take your cashiers check to the title company, sign a stack of papers and a promissory note, and the seller assigns you the title or deed. Once you’ve signed on the dotted line, the house goes into your name in the county records.

In some cases a Contract for Deed (CFD), an alternative method to a mortgage, is used. Instead of the property going into the borrower’s name on the closing day, the seller who is financing the property will stay on the title until the contract is satisfied and paid in full. If everything in the contract is fulfilled appropriately, the title or deed will then be transferred into the borrower’s name.

TL; DR – A title or deed is a record with the county showing who is responsible for a specific property.

Performing Note

A performing note is a debt in which the borrower regularly makes their monthly payments as contractually agreed.

NoteRehabber The Basics of Real Estate Investing Lingo

Non-Performing Note

On the flip side, a non-performing note is a mortgage that isn’t being paid by the borrower according to the terms of the loan. A note is usually considered “non-performing” after 90 days of non-payment.

At NoteRehabber, this is the type of asset we specialize in. We specialize in non-performing notes and we work within the real estate industry to get notes re-performing, which may involve working out a new contract with a borrower, creating a cash-for-keys deal, or any number of other possible strategies.

Though it is challenging, investing in non-performing notes can be a lucrative venture in real estate. However, there are several risks of investing in non-performing notes that need to be mitigated.

Tax Sale

A tax sale is when a county that is owed back taxes, sells that property at auction to recuperate the back taxes. When the county auctions off a property – even if the borrower has a mortgage on the property – the borrower no longer has rights to it and can be evicted.

If an asset you’re considering buying has unpaid taxes, you will likely need to cover the expense of those unpaid taxes to prevent the county from putting it up for a tax sale.

In the note investing industry, most investors attempt to recuperate that cost with adding it to the arrears or corporate advance balance. This means that once you have purchased an asset and become the new lender to the borrower, the cost of those unpaid taxes is added into what the borrower ultimately owes you. The treatment and payment of the arrears or corporate advances depend on the terms of the contract, or the state requirements.

Have more questions about real estate investing lingo? Another guide is coming soon.

Until then, if you want more information like this, subscribe to our newsletter below to get it delivered straight to your inbox.

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