Investing in fixed secured real estate notes can yield fruitful returns often higher than mutual funds while providing security of investment only found with bonds and CD's. Conservative investors looking for stable long-term investments such as bonds, CD's or money-markets currently only receive APR rates between 2% and 4%. The inflationary period looming due to government spending, budget deficits and money printing will continue to drive these investments into the ground. A high price to pay for security of investment.

What Is A Fixed Secured Note Backed By Real Estate?

A first position high yield collateralized note much like a lean held by a mortgage lender on a piece of real estate that can be called due if the terms of the agreement are not met between lender and borrower. In this case, the note holder (i.e. private lender) would simply take control of the real estate if the terms of the loan are not met. The borrower (i.e. real estate investor) will buy a piece of real estate with the money provided by the note holder. The two parties agree on a set of terms of the note. The property is purchased and the term starts. A fixed secured note can also provide investors such as retirees tax free income by using a self-directed IRA for the source of the note. For more information on self-directed IRA's visit: http://www.trustetc.com

Terms

The terms of a fixed secured note are generally 3 to 5 years, 6% to 10% APR interest only with monthly payments. There is typically a balloon payment of the original principle payed to the note holder at the end of the term just like a CD.

For example, a fixed secured real estate note of $30,000 at 10% interest only over a 5 year period would net $3,000 per year for a total of $15,000 over the term yielding an ROI of 50% ! A 5 year CD at 2.5% APR would net $740 per year for a total of $3,750 over the same term for a dismal ROI of 12.5%. The 10% real estate note would pay 4 times that of the CD!

The Real Estate Held By The Note

The type of real estate secured by a note is usually a single family home with long term tenant, multi-family apartment, commercial or retail strip depending on the amount borrowed. Currently, single family homes in well saught after neighborhoods are providing the best investments. Tight credit, foreclosures and job loss have provided the real estate market with low-cost homes that can be purchased at pennies on the dollar thus providing cash-flow for the borrower and stable fixed secured income for the note holder. The tight credit market has also provided a pluthera of would be home buyers that cannot receive mortgages thus providing more single family rental demand nation wide. This trend will continue well into 2011.

For example: A typical 3Br/1Ba, 1200 sq.ft. foreclosure home can be bought for roughly $25,000 today in well sought after working class neighborhoods in manufacturing states around the US. With a rehab cost of $7,000 the total cost would be $32,000. If this property was rented for $1,000/month to a good long term tenant with property taxes of $3,500/year and expenses of $1,000/year the NOI (Net Operating Income) would be $6,500/year with vacancy. A fixed secured note of $32,000 at 10% APR (interest only) for a 5 term would pay the note holder $267/month with $733/month left to the borrower to re-invest and to cover expenses. Over the 5 year term the note holder would receive a total of $16,000 in 60 monthly payments. The note holder would also receive the original $32,000 principle back at the end of term. The ROI would be 50% !

For more information on investing in fixed secured real estate notes I have found the following site useful in understanding the process and benefits: www.greatlakessecuredinvestments.com