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Please do not allow yourself to be fooled by infomercial spinners who would have you believe you can simply find notes, post them on the Internet in some "Note Network" and pull in profits. It simply does not work like that, and you will go broke trying it, while the infomercial guru pockets your money.

Notes - in this case, mortgage notes - can be a powerful tool for investors. Notes held by private parties and businesses (not mortgages held by banks) are an asset that can be bought, sold and traded. The real power lies in the fact that notes have less value than cash - a bird in the hand is worth two in the bush, so to speak.

It's like the lottery - if you take the annual payment option, you win the entire jackpot amount. But if you choose the cash option, you only get about 1/2 of the jackpot amount. This is because payments (as opposed to a lump sum) can accrue more interest over time. For example, let's say the jackpot CASH value is $1,000,000. If you take the cash, you get a million bucks. But if you take payments, the lottery commission can put that million into an annuity (investment) that earns interest. This allows them to pay you $100,000 per year for 20 years, which is TWO million bucks.

Therefore, notes are generally purchased at a discount - the amount of the discount depends on the quality of the notes, interest rate, etc. It is not unusual to buy notes at 50-80% of face value.

But wait - there is interest, too. Let's say a note has a face value of $100,000, and the interest rate is 7% for 20 years. The monthly payment being made on that note is $775.30. If you buy the note at discount for, say, $80,000, you have not simply made a $20,000 profit. You have made $20,000 plus 7% interest for 20 years - a grand total of $186,072 is collected. Subtract the $80K you paid for the note and your profit is $106,072.

But it takes you 20 years to collect! But what if you could collect the $20,000 profit right now?

Let's say you buy buy that note that is worth $100,000 for $80,000. And let's say a seller of a $200,000 home will accept that $100,000 note in exchange for $100,000 of his equity. In effect, you only pay $180,000 for his home - $100,000 cash, and $80,000 you paid for the note. If you resell the home immediately, you can pocket that $20,000 now.

Better yet, "The Simple Man's Guide to Real Estate"® details how an investor can do this easily, without having to use any of his cash at all - not a single penny!

Yes, notes have an allure all their own.