Making the Jump from Real Estate to Notes

Published September 2026  •  Based on a Paperstac Podcast Episode  •  10 min read  •  Paperstac Education

If you already flip, wholesale, or hold rental property, you’re closer to note investing than you might think. You already read neighborhoods, estimate repairs, and think about exit strategy. Notes just add one more skill on top: underwriting the person making the payments, not just the property behind them. In this episode of the Paperstac Podcast, Rick Allen and TJ Osterman walk through exactly how that transition works.

Why Real Estate Investors Have a Head Start

Wholesalers, flippers, and landlords already do a version of what a note investor does. They evaluate a property. They estimate what it’s worth today, and what it could be worth after repairs. They think through how they’ll exit the deal before they ever buy it.

That foundation doesn’t disappear when the asset becomes a note instead of a property. It just gets paired with a new layer: the person making the payments.

Understanding the Collateral Behind the Note

Every note is secured by real property. That means the property evaluation skills a real estate investor already has apply directly. What’s the property actually worth? What condition is it in? What would it take to sell it if you ever had to?

A note investor asks these same questions. The difference is that, most of the time, they’re asking them about a property they haven’t personally walked through — which is exactly why strong documentation and data matter so much in note investing.

As-Is Value vs. Wholesale Value

Real estate investors are used to thinking in multiple value frames at once: retail value, as-is value, and wholesale value. That same multi-angle thinking is useful when evaluating a note’s collateral.

A note secured by a property with strong as-is value gives you a real equity cushion if something goes wrong. That’s the same logic behind loan-to-value analysis in note underwriting — see our mortgage note due diligence checklist for the fuller picture.

Becoming the Bank: Underwriting the Borrower

Here’s the real shift. As a property investor, you underwrite an asset. As a note investor, you also underwrite a person.

That means looking past the property to the borrower’s story: their payment history, what their situation looks like, and what’s likely to happen next. A note with a strong property and a shaky payment history is a very different deal than one with both working in its favor.

Performing vs. Non-Performing Notes

A performing note is one where the borrower is paying as agreed. A non-performing note is one where they’re not. That distinction changes almost everything about how you evaluate and price a deal.

Real estate investors who already work with distressed property have a natural edge here. Evaluating a non-performing note draws on a lot of the same instincts as evaluating a distressed house. For the full picture on what happens if a note stops performing, see our guide on exit strategies for a defaulted note.

How Rick and TJ Got Started

Before Paperstac, Rick and TJ were already deep in real estate — fix-and-flips, rentals, and wholesaling, much of it in lower-income Central Florida neighborhoods. That existing comfort with those neighborhoods became their edge when they moved into notes.

Their first batch of roughly 30 notes was concentrated in those same lower-income areas — deals other buyers didn’t want to touch, priced accordingly. Their very first note closed in just 14 days. That result was enough to go back to the seller and ask for everything else they had in Central Florida, picking up notes for as little as $8,000 to $12,000 each.

From there, growth followed a simple pattern: once local inventory ran out, they expanded outward — first to nearby counties, then Tampa, then Jacksonville, then Tallahassee. Eventually they realized the same evaluation process worked anywhere, and their footprint grew to include Tennessee, North Carolina, Arizona, California, Texas, and even Puerto Rico. Better data and technology made that expansion far easier than it would have been a decade earlier. It’s the same shift that lets a real estate investor confidently evaluate a note today outside their own backyard.

Turning Rentals Into Seller-Financed Notes

Here’s a direct path from real estate into notes: sell a rental property you already own using owner financing instead of a traditional sale.

Instead of a lump-sum payout, you become the lender. The buyer makes payments to you over time, and you’re holding a note secured by a property you already know inside and out. It’s a way to turn an existing asset into a new kind of income stream, without starting from zero on due diligence.

This resonates especially with landlords managing a larger portfolio who are ready to step back from day-to-day property management — the maintenance calls, the tenant turnover. They aren’t ready to walk away from the income, though. Offering owner financing to a qualified buyer, often with 20-30% down, can let a landlord target a yield in the 9-12% range while handing off the physical property entirely.

Buyers choose owner financing for reasons beyond credit trouble, too. A borrower with strong credit and a substantial down payment may still prefer it. Sometimes their income is hard to document conventionally. Other times they’d simply rather avoid a bank’s underwriting process altogether — occasionally paying off the note in full within months once it’s more convenient for them.

Land Notes and Seller Financing

Land deals often already involve seller financing, which makes land notes a natural entry point for real estate investors moving into notes. Many investors buy vacant land, then sell it with owner financing rather than waiting for an all-cash buyer.

That structure creates a note from day one — no separate purchase of an existing note required to get started.

A common pattern: an investor subdivides a larger parcel into a dozen or more individual lots. Most sell to cash or bank-financed buyers, but the remaining lots — sometimes at a premium price — sell through owner financing instead. A typical structure might be a $40,000 lot with $12,000 down, financed around 13% over five or six years.

Land notes carry a distinct advantage on the downside: if a buyer ever stops paying and the land has to be taken back, it’s just vacant land. There’s no structure to maintain, no roof, no tenant. Holding costs while it’s re-marketed are often limited to a modest annual property tax bill — a fraction of what carrying a reclaimed house can cost.

A Lesson in Not Letting a Good Deal Slip Away

Rick and TJ’s actual first non-performing note, 14 years ago, was about as unpolished as a first deal gets. It was a duplex where the borrower owed $90,000, purchased for $8,400 with no formal underwriting process in place yet. The approach was simple — buy it, then figure out the resolution along the way.

TJ also points to a deal he walked away from as one of the clearer lessons from those early years. He’d negotiated to buy a note on a vacant land parcel in Windermere, Florida. The borrower owed roughly $3 million to a small community bank, and the bank agreed to sell the note for $600,000.

A capital partner had committed to fund the purchase — but when that arrangement fell through, TJ let the deal go rather than find another way to close it. About 18 months later, the same land sold to the Orange County School Board for somewhere between $3.5 and $4 million.

The lesson wasn’t really about the specific numbers. It was about not dismissing a legitimate, real-estate-backed opportunity just because it means learning something new, or working around a setback that isn’t really about the deal itself.

Notes as a Liquidity and Exit Strategy

Notes aren’t only something to buy. They’re also a tool real estate investors can use to exit a deal on their own terms.

Selling a property outright means a single lump-sum payout, taxed all at once. Seller-financing it instead spreads that income out over time. It can also open up buyers who wouldn’t otherwise qualify for traditional financing — widening your pool of potential buyers while creating an ongoing income stream.

How to Get Started

The most direct way to start learning is to look at real, live deals. Paperstac’s marketplace shows actual notes for sale, which is a faster way to build pattern recognition than reading about the concept alone.

You don’t need a large amount of capital to begin, either. Notes on the platform have listed for as little as $5,000. Putting a small amount into a single performing note — say, one paying around a 10% yield — can be a genuinely effective way to learn the full process firsthand. That includes reaching out to a seller, asking questions, and working through a real transaction end to end.

Paperstac’s platform now has more than 25,000 users. The listings include unfamiliar terms like UPB (unpaid principal balance) that are worth looking up as you go. Running an unfamiliar term through an AI tool for a plain-language explanation works well here.

From there, Paperstac Academy walks through the underwriting process step by step, so the borrower-evaluation piece — the part that’s genuinely new — has real structure behind it instead of guesswork.

Key Terms to Know

Frequently Asked Questions