RISK DEFINED… Webster says …the possibility of loss.
Any investment there is a possibility of loss but we have to look at the probability of loss.
The probability of loss in a stock is much higher than the probability of loss for a secured real estate mortgage note.


  • We are buying the note at a discount to the value of the property (20-50%) and therefore if the property value goes down then we still have an equity cushion.
  • We stand to make more money if the homeowner defaults since we have upside potential.
  • Homeowners are emotionally attached to the home.
  • No liability – If homeowner slips and falls then you are not liable as the “bank”.
  • Property is insured – unlike a stock, the collateral (property) is insured.


  • Legislative changes to the foreclosure process – low impact and states rules getting better.
  • Federal oversight changes – low probability with current administration.
  • Unexpected home value depreciation – low impact since buying at discount.
  • Changes in CFPB or FDCPA rules and regulations – low risk since at peak of regulations and now introducing bills to remove or eliminate some of the regulation.
  • Increase costs of foreclosure and legal expenses – cost have stabilized in recent years.
  • Improper collateral – make sure you are working with counterparties you trust.
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