Real estate investing doesn’t have to mean dealing with tenants, maintenance, or property headaches. Mortgage note investing offers a way to generate passive income while being backed by real estate—without the typical risks of property management. In this episode, Chris Seveney shares insights into how mortgage notes work, why banks sell loans at a discount, and how investors can take advantage of this strategy. He also breaks down their new bond offering, detailing investment options, potential returns, and key risk factors to consider. Whether you’re an experienced investor or new to alternative investments, this episode provides valuable knowledge to help you make informed financial decisions.

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Unlocking The Power Of Mortgage Note Investing: Our New Profit Sharing Offering

Unlocking The Power Of Mortgage Note Investing

In this episode, I wanted to talk about unlocking the power of mortgage note investing through our new bond offering. I want to talk about our latest fund. If you’re a reader and saying, “This is just Chris pitching a fund,” it’s not only that. If you’re someone who operates a fund, it’s worthwhile to take know some of the things we’ve implemented within the offering that you might want to consider in some of your future offerings and some of the feedback we’ve gotten from investors.

I want to talk about that, which we’ll discuss in further detail, how our bond offering works, and why this investment is structured for those investing passively. Unfortunately, this is only open for accredited investors at this time. It’s also limited to the first $25 million invested. We first opened this to our current investors. We had another webinar. In the month of March 2025, we will be opening this up to the RIA and the broker-dealers we also work with.

Before we dive too deep, let me do a refresher course on what note investing is, why banks sell loans, and this whole process. I wish Lauren was here because she gives the best explanation of this in regard to us fixing and flipping mortgage notes. Most people think about fixing and flipping, where you buy something distressed. You try and repair it to sell it at a later date. That’s what we do with mortgage notes.

We do not own the property. We buy the loans from banks and institutions who sell these loans at a discount. I recommend you watch some of our webinars on why banks sell. Once we acquire that loan, our target is to work with the borrower to get them into some type of payment plan or re-performing. We can do this because, in many instances, we buy this at a discount to the loan, so it gives us the flexibility to potentially work something out and then eventually down the road sell that loan.

One thing I’ll mention as part of that is if you’re paying full price for the loan, then typically you’re not going to have as much ability to work something out. A lot of people who do this will go right to foreclosure and don’t even care about trying to work something out with the borrower. For us, it’s very limited in the number of times we have to foreclose on assets because of how we structure our deals.

That's what we do with mortgage notes. We do not own the property. We buy the loans from banks and institutions who sell these loans at a discount. Share on X

Once we get them repaying, we’re the bank. We collect payments for that cashflow and have an exit down the road where, typically, we hope to liquidate the asset for additional fee funds because it is considered re-performing. People ask, “Why is this attractive? Why note investing?” This was recorded in 2025. First, it’s backed by real estate, where you don’t have to deal with tenants, toilets, termites, no property management, and the ability to buy things at a discount.

Back to that fix-and-flip strategy, people can buy houses at a discount. It’s been very challenging for them to find houses out on the open market. Notes are similar, but we continue to see an uptick in defaulted loans and a few other items I love to talk about. Mortgage notes are not correlated primarily to the stock market or interest rates. You look at real estate, multifamily and single family.

When you go to buy an investment property, typically you’re getting a mortgage on it, so the interest rate plays a major role in what you can pay and afford, charge for rent, and make money on that property. For us, it indicates what our buy point is on these. In many instances, the interest rate on these non-performing loans doesn’t come into account. When the market starts to stagger a little bit, note investing typically becomes a better opportunity. Hopefully, that was a brief four-minute rundown into mortgage note investing.

Breaking Down The New Bond Offering For Investors

Let’s dive into our new bond offering and talk a little bit about this, how it’s different, and what people could potentially expect from this. First, when you invest in any fund, it is more passive than traditional note investing. In note investing, you will hear terms like mailbox money and other terms. That’s similar to having a good rental with a property manager, but the moment something happens, it is no longer passive. Within a fund, you hopefully don’t have to experience any of that.

We have 700 plus investors who we’ve made every payment on time every month. For them, our investors enjoy reading our weekly updates in regards to our case studies and coming to our webinars where we talk about the fund and what we have going on. We are very communicative with our investors. We believe that helps allow for it to be more passive.

 

The other component to this offering is what’s called pari passu with our existing investors, meaning that they are on the same platform, even footing within the capital stack. The capital stack is where the order of priority is when people get paid upon an exit. These investors are similar to our other investors. We want to remind everybody that the company does not have any debt on its books. We have the salaries and expenses of our people and any ordinary expenses but no other loans, debt, or lines of credit. They are first in that capital stack.

How does it work? Your investment is secured by the company, which owns, as of this recording, 50 plus notes. Hopefully, by the time this goes live, we’ll be up over 80 as I’m in the process of doing due diligence on 29 assets that we are going to hopefully be closing in the next few days. That’s exciting. It’s over the last few weeks of hard work that our team has been looking at those. You’re secured by that portfolio. We mentioned there’d be monthly interest payments.

The kicker is that towards the end of the bond maturity, the profits for the entire company, 10%, are getting set aside for investors who are in this grouping. We have a private placement memorandum that explains all this in detail. I strongly recommend you read it. Anything that does get said on a show or the website, if there’s a conflict, it’s going to relate to the PPM. That’s how legalese works in this world. I recommend that people acknowledge that. I’ve seen people say, “Their website says this. I’m the first to say I don’t care what the website says. What does the contract say?” Sorry to go on that little bit of a side note there.

People are wondering, “Chris, you’ve got this profit-sharing bond. Tell me more.” It’s a 506(c) offering through Regulation D, which is only open to accredited investors. The minimum investment is $100,000, and we have 3 options. There is a 4-year bond that provides a 9% return with no profit share. We have a 5-year bond at 11% with no profit share, but that has a $500,000 minimum. We have a 5-year bond at 9.5% that includes profit sharing. This is limited to the first $25 million. We want to reiterate that this is not open.

People ask, “Can I wait a year to invest?” You can wait a year, but we do not anticipate this being available at that time, especially based on when we launched this to our current investors in January 2025 and the bond webinar we had in February 2025. These are going quickly. This is the way I would put it. That is the offering.

Unlike stocks, mortgage notes remain independent of stock market volatility and interest rate fluctuations, making them a reliable alternative investment. Share on X

Some frequently asked questions we get tagged along with this are who can invest. As we mentioned, it’s accredited investors only. If you are a current investor, you can’t transfer from one investment to this new investment offering, unfortunately. This is something that, with our Regulation A offering and a Reg D, are very different and distinct. Unfortunately, we can’t jump back and forth between them.

“Can you exit early?” There is that hold time. The bonds must be held to maturity. We do have a death and disability exemption within our offering. For people who also run a fund, what are some of the things that we see that people look for? The hold period within an offering can go either way. There are people who like liquidity. It doesn’t matter whether you’re 2 years or 7 years. They want something shorter. That’s something to understand, what the liquidity component is.

The other is that I don’t want extra components to the offering, like that profit-sharing component. There’s not a lot of debt funds we’re aware of that do this death and disability exemption. If one of the investors passes away, that family can redeem that at no cost, no penalty. There’s a small processing fee from our transfer agent, but other than that, there are no fees or anything involved with that, whereas other funds can charge significant penalties or fees.

Another is, what happens at maturity? This feels like some of these online subscription services where you forget you’re on auto-renew. The time hits for that anniversary. It automatically resubscribes you for 12, 24, or 36 months. We are not that type of company. At the end of maturity, you can redeem, wait three days and redeem, or keep your investment. If it was me, I would look at that point in time, potentially continuing to keep it because as a company continues to grow, it gets larger. The profit is on the entire company and not just $25 million. We anticipate that, over time, as the company grows, profits will continue to increase.

Understanding The Risks And Rewards Of Mortgage Note Investing

What are risk factors? Like any alternative investment, there are many different risks within each investment. Each investment also has some uniqueness to its risks. Some would consider the illiquidity of this offering as a risk factor. Some would consider us buying non-performing loans and not being able to work them out or the state coming up with something new or changing laws as risk factors. As the economy potentially could get better, could there be fewer loans, which could impact our ability to get the money out the door?

 

These have not been risk factors for us to date. We can’t predict the future. We recommend looking at the PPM and going through it. We outline the risk factors within the PPM. If people ever have questions, they can reach out to us. We’re happy to get on a phone call and answer your questions. This is where we differentiate ourselves. When you pick up the phone and talk to us, you might talk to Lauren, me, or Katie. You’re going to talk to somebody who is an employee of the company who knows the offering inside and out.

It’s not an answering service that’s going to push you off and give you some AI-generated response that doesn’t answer your question. One of the things that drives me nuts is when I have a question on a website, you go to a little chat feature, and you hit the thing, it’s AI-generated. How can I talk to a human? I want to talk to a human. It frustrates me when we can’t. When I started this company years ago, I liked to take the good and the bad that I’ve seen from Corporate America. One of those is not being able to get a human on the phone and make sure you can speak to a human. Those are some of the FAQs, but please reach out to us if you have more questions.

Here are some final thoughts. I want to talk about the timeliness of this. It is very timely because we continue to see investors flock toward investment strategies that are less debt-driven, meaning that they’re not investing in assets that have heavy debt on them, multifamily, commercial, or any type of real estate product where that might be 50% to 70% levered.

How Economic Trends Impact The Mortgage Note Market

You see people going to asset classes where it’s not as heavy leverage. We’re also seeing what I believe is, eventually, the start of a potential recession. Things are softening. The cost that everyone has had to incur and maxing out the credit cards have continued to increase. People might be equity-rich, but they’re cash-poor. That’s going to start having an impact. You’re going to start to see an uptick and increase in defaults.

Many people would probably say the economy's going to weaken versus strengthen, which is a good opportunity for us in the default space. Share on X

We’re already starting to see that increase in regard to some of the stress and debt that we’re seeing. We’re seeing that increased inventory as well as different types of loans. We’re starting to see a lot of investor loans get in trouble because a lot of them were doing twelve-month bridge financing. They were going to try and flip a property that they haven’t been able to sell. Those lenders don’t want to hold the debt because they’re carrying too much of it.

This all matters in regard to understanding the opportunity and having a little foresight of what’s coming down the pipe. If you asked 100 people if they think the economy is going to improve significantly over the next 24 months or go down slightly or more, 90 of them would probably say the economy is probably going to weaken versus strengthen. This is a good opportunity for us in the default space.

Lastly, for those who have not read any of our episodes or watched any of our webinars, I want to remind people that we have done over 600 deals with notes and 5 full-cycle funds in the past. We are a fully managed in-house team. If you’re interested in learning more about this profit-sharing incentive program/fund, please reach out. You can go to 7eInvestments.com and schedule a call or reach out to us. We will be able to talk to you and get you through that process. Thanks for reading this episode. As always, make sure to leave us a review on your favorite station. Thank you.

 

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