A version of this famous saying has been attributed to John D. and Nelson Rockefeller (conflicting sources); saying that the secret to being successful is to own nothing, but control everything. Although, before getting into the mortgage note space, I had never heard this statement. The more and more I look around now, I see it everywhere being quoted by “successful” investors. What you do not own cannot be taken from you, this is a basic rule of asset protection that many financial and asset protection managers use.
Actually, applying it to mortgage note investing makes this statement quite literal. You see, when you invest in or buy mortgage notes you do not own the property, the borrower owns the property, I own the loan, I am “the bank”. The borrower is the one responsible to pay the taxes, for the upkeep and maintenance of the property, insurance on the property, etc. You might even think that other real estate investors such as house flippers and landlords have control, that would be wrong in my opinion.
Flippers actually own the properties that they are flipping until they sell them. They are responsible for the mortgage (unless they paid cash outright), taxes, insurance, maintenance, etc. Even if they decided to reno the property and rent it out after the reno, they still own the property and then just become landlords. Guess what? That’s almost worse, because now you have to deal with tenants on top of all of the other items like taxes, insurance, and maintenance of the property!
This was only one of the reasons I sold my last rental property to invest in mortgage notes. Even though I had a property manager dealing with the tenants, I was tired of dealing with tenants and their demands. Once I found out that buying mortgage notes meant not only that I didn’t have to deal with tenants, but I wasn’t responsible for the taxes, insurance, or maintenance when something went wrong either! Don’t get me wrong, I loved some of the tax write offs that came along with doing rentals. However, now that I am “the bank”, I’m happy to count the income from the mortgage payments even with fewer write offs.
Let me not make it sound as if note investing is so cut and dry. I want to explain things in the clearest way possible, however there are some instances whereas a note investor I may be responsible for taxes and insurance on a note. Without going into too much detail, when a note is nonperforming, it then becomes the responsibility of the bank (the note investor) to upkeep the taxes on the property and put in place what we call “force placed insurance” or (FPI), on a property.
This does two things; one, it protects your investment should there be a fire or other hazard to the property, and two, keeping the taxes up to date will keep the city or county from taking it and selling it at auction for unpaid taxes. There are some other instances that municipalities place a lien on properties, such as not keeping grass cut, unpaid utilities, trash, or other code violations.
Even just this short take on what it means to own nothing and control everything, should be enough to interest you in learning about mortgage note investing and what it can do for you. You’ll remember in previous blogs of mine that I mentioned how many investors are using this method to invest in their retirement accounts. Just one more way to control this type of investment while earning higher than average returns!
I’ll take this time to wish you and your families the very best in the upcoming year. As always,
please continue to stay safe out there!
For more information on notes or if you have notes to sell, reach out to Zee at Awanna Holdings, LLC (571)659-5005. ©Awanna Holdings, LLC (Dec 2020-23), zee@awannarandh.com - Email
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