Real Estate Note Investing
High Yield Real Estate Notes: Get Paid First, Not Last
Every Market Crash Since 1929 Has Rewarded Lenders
Why? Because while most investors panic, lenders get paid first. They hold the debt, not the risk. And in today’s market, savvy investors are replicating that strategy through high-yield real estate notes. Let’s break down why this strategy is outperforming stocks, rental properties, and REITs—especially in uncertain economic times.
Why Real Estate Notes Offer Smarter, Safer Cash Flow for Accredited Investors
Real estate notes offer accredited investors like you a secure path to passive income—without tenants, volatility, or high fees. Backed by real assets, they deliver predictable monthly cash flow and preserve capital, making them ideal for legacy-minded investors seeking control and clarity.
Why Traditional Real Estate Investing Isn’t So Passive
Most people turn to rental properties for appreciation and passive income—but the reality is often far less passive.
Property values fluctuate with the real estate market
Interest rates climb, reducing margins
Repairs, vacancies, and property management issues eat away profits
Cash flow becomes inconsistent and unreliable
Even with a property manager, you're exposed to tenant risks, market swings, and unexpected costs. It’s far from passive. Traditional real estate investing requires operational involvement, constant oversight, and long holding periods. This adds stress and reduces liquidity.
Real Estate Mortgage Note Investing: Secured by Hard Assets
The Shift to Real Estate Notes
Real estate notes, also known as promissory notes or mortgage notes, offer a completely different path. You become the lender. You provide the capital, and in return, you collect monthly interest payments. If the borrower fails to pay, you hold the legal right to foreclose on the property and reclaim your investment—something stockholders can’t do when companies underperform. This model turns you from a speculator into a structured investor—with defined returns, a legal contract, and asset-backed protection.
Benefits of Real Estate Notes
Let’s explore why so many experienced investors are turning to real estate notes as their core fixed income strategy.
High-Yield Returns
These notes often produce higher yields than most traditional investments, typically between 6–10% annually, depending on the loan terms and underwriting.
Predictable Cash Flow
Unlike equity investments that fluctuate with the market, real estate notes offer fixed monthly income. The borrower is contractually obligated to make payments, giving you a stable, reliable income stream.
Collateral-Backed Security
Each note is secured by a hard asset, real property. In the event of borrower default, the property itself can be foreclosed and liquidated to protect your capital.
Shorter Investment Horizons
Many notes are structured for 12 to 18-month durations, meaning your capital is not tied up for years, like it is with long-term rental properties or syndications.
No Operational Burden
There’s no tenant communication, no property maintenance, and no market timing. You’re not buying a building, you’re purchasing the loan secured by the building.
What About Risk?
All investments carry risk. But with proper due diligence, real estate notes are designed to reduce risk, not increase it.
Only lend to investors, not homeowners
Foreclose if the borrower defaults
Conservative loan-to-value ratios
Senior debt position
Not affected by stock market volatility
Why Investing in Real Estate Notes Beats Traditional Strategies
The Real Estate Note Advantage Over Traditional Asset Classes
This strategy combines the benefits of real estate control with the stability and predictability of fixed income. Many investors I have spoken with are surprised to learn how investing in real estate secured loans outperforms other asset classes, especially in market downturns. Take a look below at how real estate notes perform when compared to others:
Who Should Consider High-Yield Real Estate Notes?
This strategy is ideal for qualified private investors who are looking for:
Passive, consistent income
Exposure to real estate without the operational burden
Diversification away from equities and traditional real estate
Wealth preservation in inflationary or volatile markets
Control over investment terms and risks
Real Estate Note Investing: Why Due Diligence Matters Most
Due Diligence Is Everything
Before investing, proper underwriting and deal analysis are critical. At Blue Bay Fund, we focus on reviewing borrowers’ financial liquidity and project history. Knowing an investor's past proven experience is critical to completing due diligence on a prospective loan. Verifying collateral value through appraisals and third-party reports will greatly reduce the unknowns to future property values. Having licensed and professional appraisals and property valuation experts provides clarity and honesty to a borrower's estimation of their project's future value.
One of the best ways to shore up your due diligence and underwriting of potential loan investments is to make sure you are structuring notes with low LTV ratios. Low LTV loans mean that the amount of loaned capital compared to the property's value is low enough to offset the risks of not being paid for months, while also requiring the property and borrower to go through the foreclosure process. If you loan too much on a property and then have to foreclose, your presumptive equity will be eaten away by the costs of litigation. Speaking of litigation, ensuring that personal guarantees or corporate collateral are in place is a surefire way to reduce your exposure to the risks of default significantly. When a borrower knows their name is tied to your loan, and if they default, their foreclosure will be reported to all banks and financial institutions in the future. This is a motivating factor to ensure your loan is paid on time and in full.
Being sure to monitor performance monthly and enforce timely payments is the best way to keep a tight ship and your ducks in a row. One of the greatest mistakes is for newer private lenders or note investors to service their loans. This removes the neutral third-party aspect and can make you susceptible to the borrower's emotional manipulation.
Building an Investor Mindset: Why Sophisticated Capital Moves Differently
In today’s environment, sophisticated investors are no longer asking, “What’s trending?” Instead, they’re asking, “What’s proven?” If you're not focused on becoming more sophisticated with your investment decisions, you'll always be chasing what everyone else seems to be doing, while falling behind those who make well-informed and wise decisions. When dealing with Ultra-High-Net-Worth individuals, Family Offices, and corporate retirement managers, what will be the focus of these sophisticated and accredited investors in the coming years?
Preservation of principle
Steady, compounding income
Control over investment terms
Downside protection through real assets
Bonus Insight: What to Look for in a Real Estate Note Fund
If you’re exploring opportunities where you become a passive investor in a fund, that provides you consistent opportunities to invest passively and fractionally into debt, with a private debt fund like Blue Bay, here are some key criteria you should expect:
No hidden fees
Primarily first-position liens
Geographic diversification
Track record of managing defaults effectively
Access to underwriting data
Why Now Is the Time to Pivot
Many investors are turning to estate note investing as a way to generate steady income from mortgage payments without owning property. By investing in mortgage notes, you can earn interest while the borrower repays the loan—offering both passive income and asset-backed security.
Rising interest rates, also mean that borrowers are paying their lenders higher interest as well. Investing in Debt means you take advantage of this market dynamic. Equity market instability and persistent inflation continue to push volatility and affordability to the front of everyone’s mind. Watching your retirement accounts fluctuate like a tiny sailboat battered by the economic storms is a motivating factor to find an alternative investment outside of the standard financial planner’s narrow advice. The growing demand for private capital in the alternative asset space means that there will be more and more opportunities for those who are looking and willing to take the road less traveled yet much less risky.
This Isn’t Speculation, It’s a System; Proven, Secured, and Time Tested
When you invest in Blue Bay Fund, as a passive investor, you gain immediate access to high-yield real estate notes. You do not have to chase borrowers, opportunities, or build a business. You’re investing in a fixed-income strategy that offers predictable, dependable monthly cash flow. There is no other investment method that offers this. Even your highest-paying dividend stock pays out quarterly… if they pay out (consider 2008 through 2010 for those doubting that dividend stocks never shut off the spigot). Becoming a passive investor in Blue Bay Fund means your principal is at your discretion to select and allocate towards whatever investments you deem acceptable. The loans you invest in have well-defined risks and laid-out expected returns, all of which are secured to real property through a mortgage or deed of trust.
Another way that my fund partners are taking advantage of a well-built machine is the type of loans that we are creating within the Fund. Our loans have shorter investment cycles, much shorter than most note funds. Because we make loans to real estate investors for their immediate project needs, the loans our investors participate in are typically 12-18 months long, with an average loan length of 9 months or less. This allows our investors to quickly pivot into safer, lower-risk investments.
For investors who value stability, security, and stewardship over speculation, this strategy is a game changer and a family generational wealth protection strategy that sophisticated and accredited investors use. They are positioning there portfolio and their family’s financial future on wealth that endures.
My name is Edwin Epperson, and I am the manager of Blue Bay Fund I, a customizable debt and equity fund. Schedule a free consultation with me, and I’ll show you how investors like you are diversifying into high-yield real estate notes secured by investment properties.
With Honor,
Edwin D. Epperson III,
Manager & CEO
Soli Deo Gloria
