Guides
Real Estate Debt Investing Guides
Plain-language guides to earning income as the lender, not the landlord: how real estate debt works, how to evaluate a note, what protects your capital, and how the options compare. Written by Sierra Davis.
Real estate debt basics
- What Is Real Estate Debt Investing?How real estate debt investing works, from earning income as the lender on loans secured by property, where lenders sit in the capital stack, what protects them, and the risks.
- How Real Estate Debt Funds WorkA real estate debt fund pools investor capital to make or buy loans secured by property. How they work, how investors are paid, fund types, and what to ask before investing.
- What Is Private Real Estate Credit?Private real estate credit is lending secured by property from non-bank lenders. How it fits within private credit, why it lasts, the main strategies, and the risks.
- Mortgage Note Investing ExplainedMortgage note investing means owning the loan behind a property instead of the property. How notes work, how discounts create yield, the 3P underwriting framework, and the risks.
- How to Invest in Real Estate Debt with a Self-Directed IRAHow a self-directed IRA can hold mortgage notes, private real estate loans, and real estate debt funds, including how it works, setup steps, prohibited transactions, UBTI, RMDs, and risks.
- How Short-Term Private Real Estate Loans Make MoneyHow private lenders profit from short-term real estate loans through interest and origination points, plus Dutch vs. non-Dutch interest on rehab draws, loan-to-ARV limits, and a worked IRR example.
Choosing an income fund
- How to Choose the Best Real Estate Debt Fund for a Self-Directed IRAWhat makes a real estate debt fund a good fit for a self-directed IRA, including fund-level borrowing, tax reporting, monthly income, terms and RMDs, plus a checklist and where Essential Income Fund I fits.
- Alternatives to Real Estate Syndications for Passive InvestorsPassive alternatives to real estate syndications, including debt funds, mortgage notes, REITs, DSTs and interval funds, how they compare on income, liquidity and risk, and when a syndication still fits.
- Income Alternatives When CD and Savings Rates FallWhat reinvestment risk means when CDs renew at lower rates, how to keep emergency savings liquid, and income alternatives for accredited investors, with the trade-offs.
- How to Compare Real Estate Debt Funds With a Due Diligence ScorecardA due diligence scorecard for comparing real estate debt funds on lien position, LTV, borrowing, fees, underwriting, liquidity and reporting, with red flags and Essential Income Fund I's answers.
- Investing in a 506(c) Fund, From Accreditation to First PaymentWhat Rule 506(c) means, how accredited investor verification works through a third party or CPA letter, and the steps from subscription to funding to your first payment.
- Real Estate Debt Funds With a Low Minimum InvestmentWhat counts as a low minimum for a private real estate debt fund, the tradeoffs that can come with it, how to compare funds at smaller amounts, and where Essential Income Fund I fits.
- Real Estate Debt Funds With No Management Fees, and How the Manager Gets PaidHow real estate debt fund managers get paid, from management fees and carried interest to origination points and the spread model, what each means for incentives, and where Essential Income Fund I fits.
- Real Estate Funds That Issue a 1099 Instead of a K-1Why some real estate funds issue a K-1 and others a 1099-INT, how the fund's structure decides it, what K-1 timing and state filings can mean for you, and where Essential Income Fund I fits.
- Real Estate Income Funds That Pay Monthly, and What to Look ForHow to evaluate real estate income funds that pay monthly, including where the payments come from, fixed vs. variable rates, start dates, collateral and liquidity, plus where Essential Income Fund I fits.
- Real Estate Income Without Capital CallsWhat capital calls are, which real estate structures use them, what happens if you can't meet one, and income alternatives that are funded once at the start.
- Selling Your Rentals but Keeping the IncomeFor landlords who are done managing tenants, how taxes on a rental sale generally work, 1031 versus a taxable sale, and ways to replace rent with interest income.
- When Your Syndication Pauses Distributions, Here's What Income Investors Can DoWhy real estate syndications pause distributions, including floating-rate debt, refinancing and occupancy, what investors can do next, and how contractual income structures compare.
- Tired of Waiting on Your K-1? Real Estate Income Reported on a 1099Why real estate K-1s arrive late and force extensions, which income structures report on a 1099 instead, the trade-offs, and where Essential Income Fund I fits.
Comparisons
- Real Estate Debt vs. Real Estate SyndicationsReal estate debt and syndications are both passive, but one makes you the lender and the other an owner behind a bank loan. Compare position, income, upside, rate sensitivity, and risk.
- Mortgage Notes vs. Rental PropertyMortgage notes and rental properties are both backed by real estate. Compare income, responsibilities, risks, upside, and liquidity to decide whether to be the lender or the landlord.
- Private Real Estate Debt vs. REITsPrivate real estate debt and REITs both give investors real estate income without owning property directly. Compare liquidity, price volatility, income source, leverage, fees, and minimums.
- Private Credit vs. Private EquityPrivate credit investors lend; private equity investors own. Compare position in the capital stack, return drivers, hold periods and the J-curve, fees, and where real estate credit fits.
- Dividend Stocks vs. Real Estate DebtDividend stocks pay what a board declares; real estate debt pays what a loan contract requires. Compare income, collateral, price swings, taxes, and liquidity.
- Stock Market vs. Real Estate DebtStocks make you an owner of a company; real estate debt makes you the lender on a property. Compare returns, volatility, collateral, liquidity, and growth.
- Bonds vs. Private Real Estate DebtBonds and private real estate debt both pay interest, but they differ in what backs the loan, price volatility, liquidity, tax treatment, and who can invest. Compare them side by side.
Risk and underwriting
- What Is a Performing Mortgage Note?A performing mortgage note is a loan whose borrower is paying as agreed. How seasoning, borrower qualification, and payer equity determine whether a performing note keeps performing.
- What Is Loan-to-Value (LTV) in Real Estate Lending?Loan-to-value (LTV) compares a loan balance to the property's value. How to calculate LTV, why lenders keep it low, and how investment-to-value (ITV) measures a note buyer's cushion.
- What Happens When a Borrower Stops Paying?What happens to a lender or note investor when a borrower defaults, including the six resolution paths, how foreclosure timelines differ by state, and how underwriting determines the outcome.
- Senior-Lien Real Estate Debt ExplainedA senior (first) lien is the loan paid first from a property if the borrower defaults. How lien priority and recording work, how junior liens differ, what can prime a first mortgage, and title.
- The Case for Non-Performing NotesWhy some investors buy non-performing mortgage notes, including deep discounts priced to the property, multiple exit paths, and the chance to keep families in their homes, plus the real risks.
- What Is a Third-Party Loan Servicer?A third-party loan servicer collects payments, keeps records, and handles borrower notices for a note owner. What servicers do, what they cost, and how to choose one.
- What Is a Broker Price Opinion (BPO)?A broker price opinion (BPO) is a licensed agent's estimate of a property's likely sale price. How BPOs compare with appraisals and AVMs, and why lenders rely on them.
- What Is Asset-Based Lending in Real Estate?Asset-based lending sizes and approves loans primarily on the collateral's value rather than the borrower's credit. How it works in real estate, how lenders protect capital, and where the limits are.
For accredited investors
- 7 Real Estate Investments for Accredited Investors, ComparedCompare seven real estate investments open to accredited investors, from syndications and debt funds to notes, REITs, and private equity funds, by income, liquidity, position, and risk.
- Passive Real Estate Income for Accredited InvestorsHow accredited investors can earn real estate income without managing tenants through debt funds, mortgage notes, syndications, REITs, and self-directed IRAs, plus what each still asks of you.
Who it's for
- Real Estate Debt Investing for AttorneysHow attorneys can evaluate a real estate debt fund, including what to read in the PPM, subscription documents and loan files, plus conflicts, time and where Essential Income Fund I fits.
- Diversifying Crypto Gains Into Real Estate-Secured IncomeHow crypto investors can evaluate moving part of their gains into real estate debt, including volatility versus contractual income, taxes on selling, accreditation, liquidity and funding.
- Passive Real Estate Income for Doctors and Medical ProfessionalsHow physicians and other medical professionals can evaluate real estate debt for passive income, including time, taxes on interest, retirement accounts, student debt and liquidity.
- Real Estate Debt for Family OfficesHow family offices can evaluate real estate debt as an allocation, including its portfolio role, diligence depth, entity investing, reporting and manager access, plus where Essential Income Fund I fits.
- Real Estate Debt for Nonprofits and EndowmentsHow nonprofits and endowments can evaluate real estate debt, including accredited entity tests, board approval and investment policy, UBTI and debt-financed income, and liquidity needs.
- Why Experienced Real Estate Investors Add Debt to Their PortfolioWhy experienced real estate investors add debt positions, including moving from operator to lender, diversifying their own capital stack, time and the tax trade-off versus depreciation.
Portfolio and retirement
- IRR vs. MOIC Explained for Private Real Estate InvestorsIRR measures how fast your money grows; MOIC measures how much it grows. How to read both, why projections can be engineered, and how a fixed monthly coupon compares.
- Growth vs. Income Investing and Where Real Estate Debt FitsGrowth investments aim to increase in value; income investments pay cash along the way. How to balance the two, why the income engine you choose matters, and where real estate debt fits.
- Real Estate Debt for Retirement Income and Monthly Income Without Selling SharesHow real estate debt can supplement savings and provide monthly retirement income without selling shares, compared with a high-yield savings account, plus laddering, IRAs, and RMDs.
- Levered vs. Unlevered IRR for Mortgage Note InvestorsLevered vs. unlevered IRR on the same mortgage note, using a line of credit or capital partner, how the cost of capital changes your return, and why leverage magnifies losses.
Seller financing
- How Seller Financing Works When the Seller Becomes the BankSeller financing lets a property owner act as the lender. How the note and mortgage work, why buyers and sellers use it, how the note can be sold, and the compliance rules.
- What Is a Contract for Deed?A contract for deed is seller financing where the seller keeps legal title until the buyer pays in full. How it works, buyer protections, state-law differences, and investor notes.
- Land Notes as a Case Study in Diversifying With Small BalancesWhat land notes are, why investors buy seller-financed notes secured by vacant land, and an IRR case study showing how spreading capital across small notes changes the outcome when one defaults.
Selling a note
- How to Sell Contract for Deed PaymentsHow to sell the payments on a contract for deed or land contract, how buyers price them, what transfers at closing, the state-law issues to check, and how to get a quote.
- How to Sell a Land NoteHow to sell a land note from seller-financed vacant land, how buyers price land notes differently from house notes, what documents to gather, and how to get a quote.
- How to Sell a Mortgage Note in KansasHow to sell a mortgage note in Kansas, why judicial foreclosure affects how buyers price Kansas notes, what documents to gather, and how to get a quote.
- How to Sell a Mortgage Note in MissouriHow to sell a mortgage note or deed of trust in Missouri, including how buyers price notes, what documents to gather, how Missouri foreclosure rules affect value, and how to get a quote.
- How to Sell a Mortgage Note in TexasHow to sell a seller-financed mortgage note or deed of trust in Texas, how buyers price it, the Texas consumer rules that can affect value, and how to get a quote.
- Selling Part of Your Note With a Partial Note SaleHow a partial note sale works, how buyers price a set number of future payments, what happens at payoff or default, a worked example, and how to get a quote.
Essential Income Fund I
- How Essential Income Fund I WorksHow Essential Income Fund I works, including what it invests in, how investors are paid a fixed monthly rate, how loans are protected, fees, terms, and how to invest.
- Essential Income Fund I Frequently Asked QuestionsAnswers about Essential Income Fund I, including what it invests in, who manages it, rates and terms, fees, leverage, risks, liquidity, and who can invest.