What Are Paper Assets and Why Should You Care About Them?
When people think about investing, they usually picture stocks, bonds, or real estate. But there's another type of investment that many people don't know about: paper assets. Let's talk about what paper assets are and why they might be a good addition to your investment plans.
What Are Paper Assets?
Paper assets are legal documents that represent money someone owes. The most common type is called a "mortgage note." This is a promise to pay back money borrowed to buy a house or building.
Think of it like this: When you borrow money from a bank to buy a house, you sign papers promising to pay it back with interest. That promise is a paper asset that the bank owns. The bank can keep it or sell it to someone else.
Other examples of paper assets include:
Business loans
Car loans
Personal loans
Tax liens
Court judgments
Why Would Someone Invest in Paper Assets?
Paper assets can be very interesting investments for several reasons:
1. You Can Buy Them at a Discount
One of the most exciting things about paper assets is that you can often buy them for less than their full value. For example, a $100,000 mortgage note might be available for $80,000. That's an immediate $20,000 difference!
2. Regular Monthly Income
When you own a paper asset like a mortgage note, you receive regular payments from the borrower. This creates a steady stream of income month after month.
3. Secured by Real Property
Most paper assets are secured by real property (like a house). This means if the borrower stops paying, you have rights to the property.
4. Different Exit Options
With paper assets, you have several ways to make money:
Hold the note and collect all the payments
Sell the note to someone else
Work with the borrower to pay off the note early
A Simple Example
Let's look at a basic example of how paper asset investing works:
Sarah has a mortgage note where James owes her $100,000 plus interest. James pays $800 every month. Sarah needs money for a business opportunity, so she decides to sell the note.
Michael buys the note from Sarah for $85,000. Now James pays Michael $800 every month instead of Sarah. If James makes all his payments, Michael will eventually receive the full $100,000 plus interest, even though he only paid $85,000 for the note.
That's how paper asset investors make money – by buying at a discount and collecting the full amount over time.
Who Invests in Paper Assets?
Paper asset investing used to be done mostly by banks and big companies. But today, individual investors are getting involved too. It's a way to diversify beyond stocks and physical real estate.
People who invest in paper assets often:
Want monthly income
Like the security of real estate without the hassle of managing properties
Understand basic real estate principles
Have some money to invest (usually at least $20,000)
Are patient and can wait for returns over time
Challenges of Paper Asset Investing
Like any investment, paper assets come with challenges:
You need to understand legal documents
You should know how to value properties
You must check the borrower's payment history
You need to know what to do if payments stop
You should have a plan for each investment
How Unfeigned Capital Helps
At Unfeigned Capital, we help investors understand and navigate paper asset investing. We can:
Help you find good paper assets to buy
Check all the documents to make sure they're valid
Verify the value of the property securing the note
Review the borrower's payment history
Help you decide on a fair price to offer
Handle the purchase process
Set up servicing to collect payments
Is Paper Asset Investing Right for You?
Paper asset investing might be a good fit if:
You want to earn monthly income from your investments
You're interested in real estate but don't want to deal with tenants
You have some money to invest and are looking for alternatives to stocks
You understand that this is a longer-term investment
You're willing to learn about a new type of investing
Next Steps
If you're curious about paper asset investing, here's what to do:
Learn more about mortgage notes and how they work
Think about your investment goals and timeline
Consider what amount you might want to invest
Contact us for a free consultation to see if paper asset investing might be right for you
Remember: Paper asset investing isn't get-rich-quick. It's a way to potentially earn good returns over time with less work than traditional real estate. Many investors find it's a great addition to their overall investment plan!
