2. Investing in real estate notes can be a
financially rewarding and lucrative investment.
However, it can also be complex and disastrous
if you don't do your DUE DILIGENCE.
Here at Passive Note Investing, we always
provide our clients with a complete Note
Package that contains all the details and
documents they need to review before they
purchase a note.
However, some investors are still confused
about what they should look for when buying a
real estate note as a high yield, low risk, turn-
key investment.
ABOUT THIS GUIDE
What to Expect
Discover the value of passive note investing
Make better investment decisions by asking the right questions
Minimize risks and losses
Maximize profit by choosing the best note for you
Receive double-digit monthly returns in a low-risk environment
Know your options in case your note stops performing
Learn how Rylex Capital LLC Notes are originated and sold to investors
In this guide, "10 Questions You Must Ask Before Buying Real Estate Notes"
you will learn how to:
3. PASSIVE NOTE INVESTING
MORE QUESTIONS?
Passive Note Investing focuses on providing its clients with turn-key,
high performing investment opportunities secured with carefully
selected residential properties in the Texas market. The website is
owned and managed by Rylex Capital LLC, a real estate property
solutions firm that concentrates in the Lone Star State – Texas!
With over 50+ years of cumulative experience in the real estate sector,
serving hundreds of satisfied clients and counting, our business
continues to help busy, hard working professionals, business owners,
and investors put their hard earned money to work for them.
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email info@passivenoteinvesting.com
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4. 1
WHAT SHOULD I LOOK FOR
WHEN BUYING
REAL ESTATE NOTES?
"Every note investor is required to perform
due diligence before closing the deal."
Simply stated, due diligence is doing one's homework. Before an
investor purchases a real estate note, it is very important that the
investor does his/her homework on who is selling the note, the
documents that support the note for sale, the terms of the note, and
the property and borrower that the note is associated with.
Due diligence gives the buyer the opportunity to check if the note is a
"full doc" loan which includes all the underwriting and note documents
as well as property information.
NOTE BUYER DUE DILIGENCE CHECKLIST
Who is selling the note - a broker or the originator?
The principal balance
Interest rate
Term or length of the note
The property that the note is secured by
The borrower’s capacity to repay the loan
Mortgage & Underwriting documents
Dodd-Frank and SAFE Act compliance
Compliance with all other loan underwriting guidelines
The note seller may or may not provide all the documents
necessary to verify the above-listed checklist. If the note seller
cannot produce the "full doc" file for your due diligence, then be
very cautious and aware of what note is being offered for sale.
Rylex Capital, LLC provides all of these items in our Note
Investment Package. You may call 972.638.7360 or
email info@passivenoteinvesting.com if interested in
viewing a sample Note Investment Package.
10 Questions You Must Ask Before Buying Real Estate Notes
WHAT EXACTLY IS DUE DILIGENCE?
5. Geography plays a big role in making note investment decisions.
The place of origin of the note and the location of the property are two
very important factors to consider when buying a note. Tax implications,
foreclosure laws, and the current market environment of the property
must be taken into consideration.
2
WHAT STATE WAS
THE REAL ESTATE
NOTE ORIGINATED?
It's not just out of coincidence that our notes all
originate in Texas.
We purposely choose to operate in Texas
because of its many advantages.
Population
Growth
Strong
Housing
Market
Low Cost of
Living
Business
Environment
Investor
& Lender
Friendly
THE ADVANTAGES OF INVESTING IN TEXAS
In addition to the advantages listed above, Texas is also known
to have some of the best foreclosure laws, making it easier for
any investor to take back the property in case the borrower
defaults on his/her payments.
10 Questions You Must Ask Before Buying Real Estate Notes
WHY TEXAS?
6. 3WHAT IS A TURN-KEY
REAL ESTATE NOTE?
The booming housing market makes us want to
invest in real estate now more than ever. But for
most busy professionals, the demands of being a
landlord just won't fit into their busy work and
personal schedules.
Turn-key note companies like us offer a done-
for-you type of investment.
Turn-key notes are a passive form of real estate
investing that caters to busy professionals and investors
who don't have the extra time to manage their
investments on a daily basis but still want to earn safe,
secure double digit returns from their hard earned cash.
Passive Note Investing offers 100% Turn-key Operations.
The team includes:
Acquisition (Rylex Capital, LLC)
Residential Mortgage Loan Originator (RMLO)
Attorneys
Title Companies
Insurance Companies
Mortgage Servicers
10 Questions You Must Ask Before Buying Real Estate Notes
By purchasing a turn-key note, you don't need to buy the property,
find a home buyer, qualify a home buyer, incur significant expenses
nor collect on the note on an ongoing basis. All of this is done for you.
The borrower's monthly payment gets directly deposited to your bank
account. Simple, easy, hassle-free monthly cash flow.
7. 4
IS THE NOTE DODD-
FRANK AND SAFE
ACT COMPLIANT?
10 Questions You Must Ask Before Buying Real Estate Notes
An investor should be aware of the laws and regulations that directly
affect his/her investment. There are a few laws that every real estate
investor should understand and comply with. Non-compliance with laws
may place you in hot water and can lead to all sorts of complications.
THE DODD-FRANK ACT
The Dodd-Frank Act was signed in July 2010. Included in the hundreds of
Dodd-Frank Act provisions is new section 129C of the Truth in Lending
Act (TILA) which provides that no creditor may make a residential
mortgage loan without first making a reasonable and good faith
determination that the borrower has the ability to repay, based on 8
statutory criteria, to promote responsible, affordable mortgage lending.
THE SAFE ACT
In 2008 Congress enacted the Secure and Fair Enforcement for Mortgage
Licensing Act (“SAFE Act”). The legislation creates comprehensive
guidelines to register or license all residential mortgage loan originators
in the United States.
WHAT IS A RESIDENTIAL MORTGAGE LOAN ORIGINATOR?
An RMLO is defined as an individual who on behalf of the lender: (i) takes
a residential mortgage loan application, or (ii) offers or negotiates the
terms of a residential mortgage loan.
Rylex Capital, LLC only offers notes that are Dodd-Frank and SAFE act
compliant. We transact with licensed RMLO companies to ensure that
the buyers are qualified for their mortgage.
8. A note is performing if it continues to receive monthly
payments as agreed in the note contract.
5
WHAT IS THE DIFFERENCE
BETWEEN PERFORMING AND
NON-PERFORMING NOTES?
10 Questions You Must Ask Before Buying Real Estate Notes
PERFORMING NOTES
NON-PERFORMING NOTES
WHAT YOU SHOULD KNOW
A note stops performing if the other party stops fulfilling his
obligations and is usually considered delinquent or in default.
Aside from the fact that performing notes
receive monthly payments, the main difference
between performing and non-performing notes
lies in the time, effort, and predictability of cash
flow generated from the investment.
Performing notes are a more passive, secured
type of investment, while non-performing notes
demand more time and effort from the investor
to get the note to re-perform or possibly
foreclose on the borrower.
9. 10 Questions You Must Ask Before Buying Real Estate Notes
Like any other investment, note investing has risks. Below are
two of the possible risks that you might face as an investor.
6
WHAT ARE THE
RISKS INVOLVED IN
NOTE INVESTING?
IF YOUR NOTE STOPS PERFORMING
One risk is if the home buyer defaults by not
making their monthly payment. Laws may vary
from state to state and investing in the wrong
state can stop or delay you from recovering what
you invested in case of default.
Even though notes are secured by real property, house prices
may increase or decrease in value over time. Again, the
location of the property plays a major role in determining the
success of your investment.
Texas currently tops the housing market charts across the U.S.
The low cost of living compared to other states makes it an
attractive destination for home buyers.
IF THE HOUSING MARKET DECLINES
Rylex Capital, LLC purposely chose to operate in Texas
because of the state's investor-friendly courts. Foreclosure
proceedings are carried out quickly with minimal costs and
the note holder can easily retrieve the property without
having to go through the usual legal procedures.
10. 10 Questions You Must Ask Before Buying Real Estate Notes
We discussed risks in Question 6. The good news is that if you
buy the right note, these risks can be mitigated and your capital
protected. The key is understanding LTV or Loan to Value.
7
HOW CAN YOU
MITIGATE
RISKS?
WHAT IS LOAN TO VALUE?
The term is commonly used in real estate
to represent the ratio of the first mortgage
note as a percentage of the total appraised
value of the real property.
For instance, if a note has a loan balance of $80,000 and the
property is worth $100,000, the LTV ratio is $80,000/$100,000
or 80%.
In the event of a default or a downturn in the market, as long as
the note holder has a good equity position in the LTV, his/her
capital is protected. So, when buying a note, make sure you have
a good LTV equity position in the note you are considering
buying.
For more information on LTV, please contact us at 972.638.7360
or email info@passivenoteinvesting.com
11. Many Americans are unaware of the benefits of a self-directed
IRA. In fact, only a few are taking advantage of the option of
choosing their own investments for their Individual Retirement
Accounts.
8
CAN YOU HAVE
MORTGAGE NOTES IN
YOUR IRA?
10 Questions You Must Ask Before Buying Real Estate Notes
WHY A SELF-DIRECTED IRA?
TAKE HOLD OF YOUR FUTURE
Don't leave your fate to pension plans and government
retirement funds. Don't expose your retirement funds to the
volatile stock market. Create a self-directed IRA and take
control of your retirement. Make the best of your golden
years by securing financial freedom.
WHY INVEST IN NOTES INSIDE YOUR IRA?
Notes provide you with high cash flow earnings at minimized
risk but with little time and effort. You will also benefit from tax-
deferred or tax-exempt interest if you choose to include notes in
your IRA.
For more information on how to set up a self-directed IRA or
how to divest your retirement funds into high yield, low risk real
estate notes, please call us at 972.638.7360 or email
info@passivenoteinvesting.com
12. If you are looking for high performing income opportunities in a low-risk
environment without having to do much work, then you may want to
consider investing in performing real estate notes.
Here's how our mortgage notes stack up against other investments.
9
HOW DO NOTES
COMPARE WITH OTHER
INVESTMENTS
10 Questions You Must Ask Before Buying Real Estate Notes
ARE NOTES THE BEST TYPE OF INVESTMENT?
MONEY MARKET
ACCOUNTS
The highest yield
on money market
accounts is 0.90%
APY.
US TREASURIES
Yield on 10-year
Treasury note
remains at 1.75%
US CORPORATE
BONDS
A-rated Corporate
Bond yields are 5%
on average.
BUY AND HOLD
REAL ESTATE
Single family rentals
have approx. 8-10%
returns before
necessary rental
costs
GOLD
Gold prices are at
multi-year lows
and do not provide
cash flow.
Our turn-key real
estate notes earn
+10% yield secured
by appreciated
property.
RYLEX CAPITAL
NOTES
13. Passive Note Investing provides detailed information and
documentation to educate investors in the note purchase
process.
Follow our simple three-step note investing blueprint and start
earning double-digit income by purchasing Rylex Capital
performing notes.
10
HOW DO I START
PURCHASING REAL
ESTATE NOTES?
10 Questions You Must Ask Before Buying Real Estate Notes
Step 1. Learn
Access our guides, books, and training courses for FREE.
Step 2. Invest
See our note inventory for a list of available investments.
Step 3. Talk to Us
Arrange a call with us to receive your note package. Feel free to
contact us at 972.638.7360
or email info@passivenoteinvesting.com
.
Visit our website
www.passivenoteinvesting.com
to learn more
about how to become a real estate note investor.
14. WHY SHOULD I INVEST IN
PASSIVE NOTE INVESTING?
10 Questions You Must Ask Before Buying Real Estate Notes
100% Turn-Key Program.
High Cash Flow.
Low Maintenance Investment.
Low Risk.
Capital is secured by a hard asset.
Excellent Loan to Value (LTV).
Flexibility: We can structure the Note terms to suit the
Investor. We focus solely on a market with a vibrant economy,
strong property market and increasing home values
Our private mortgage notes offer above market yield & cash
flow.
We guide the investor through the note buying process,
which includes property and note due diligence.
We conform to all loan underwriting & documentation
guidelines.
We work with the title company who files the First Lien
Deed to ensure note security is in place.
WHAT SETS US APART
WHY CHOOSE US
GET A FREE CONSULTATION
Call us at 972.638.7360 or email info@passivenoteinvesting.com
to talk to a representative.
