Note investments can be a great way to get started investing your funds with your Self-Directed IRA. But before you get started, you’ll need to understand which approach is best for you. What kind of investor are you and how much time do you have to run your investing business? The answer to those questions, and several others, will help you determine whether you are ready to jump right in as an active investor or prefer a more passive approach and rely on the operator for expertise and their established relationships. Join Fred Moskowitz as he delves deeper into the different approaches and goes over the advantages and disadvantages and each to help you discern which one is right for you.

What You Will Learn in This Class:
• Making a personal decision that is right for your situation
• A closer look at the pros and cons of each investing style
• Transitioning between approaches
• And much more

Fred Moskowitz is a note investor and best-selling author who has trained countless investors from all walks of life on how to create passive income streams of their own. In the note industry, Fred manages a mortgage note investment fund and is considered an industry veteran within the note investing arena. Fred is an advocate for spreading awareness about self-directed investing and enjoys teaching investors how to accelerate their financial growth using self-directed investment vehicles such as self-directed IRAs and self-directed HSAs….(read more)

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Investing in notes can be a great way to earn passive income, but it’s important to understand the two different approaches – active and passive – before making any decisions. Each approach has its own unique advantages and disadvantages, and deciding which one is right for you will depend on your investment goals and personal preferences.

Active Note Investing

Active note investing is when an investor takes on an active role in managing their note portfolio. This means actively finding, underwriting, and servicing individual notes. This approach may require more time and effort, as investors must identify and analyze potential investments, negotiate deals, and monitor their portfolios regularly. However, it also offers the potential for higher returns than passive investing.

One of the benefits of active note investing is that investors have more control over their investments. They can choose the notes they want to invest in, negotiate terms with the borrower, and manage their portfolios to optimize returns. In addition, active investors can potentially earn higher returns than passive investors, as they have the ability to optimize their notes for income and capital gains.

The downside of active note investing is that it requires a significant amount of time and effort. Investors must be willing to devote the necessary time to underwrite notes, manage servicing, and monitor their portfolios on a regular basis. Additionally, active investors may be more exposed to risks, as they do not have the diversification benefits of investing in a large pool of notes.

Passive Note Investing

Passive note investing, on the other hand, involves investing in a fund or pool of notes managed by a professional fund manager. This approach requires less time and effort on the part of the investor, as all due diligence and servicing is handled by the fund manager. However, the potential for returns may be lower than with active investing.

One advantage of passive note investing is that investors can achieve diversification without the need to actively manage individual notes. This means that investors are exposed to less risk, as they are invested in a large pool of notes rather than individual transactions. Additionally, passive investors do not need to devote as much time and effort to underwriting notes, negotiating deals or monitoring their portfolios.

On the other hand, the downside of passive note investing is that investors have less control over their investments. They cannot choose the individual notes they invest in or negotiate the terms with the borrowers. Additionally, passive investment funds may come with higher fees and expenses, which can lower overall returns.

Which Approach is Right for You?

Deciding on which approach is the right fit for you will depend on your investment goals and personal preferences. Active note investing may be a good fit if you are willing to devote the necessary time and effort to research and analysis and are comfortable taking on more risk in exchange for potentially higher returns. On the other hand, passive note investing may be a good fit if you prefer the benefits of diversification and want to minimize the time and effort required to manage your investments.

In conclusion, active and passive note investing are two different approaches to investing in notes, each with its own strengths and weaknesses. Choosing the right approach will depend on your investment goals and personal preferences, and it’s important to weigh the pros and cons of each before making any decisions.