Signing up for a big race or event sends waves of excitement through your body, if you are like me. Whether you set up a training plan or make travel preparations, you probably want to know what to expect before you sign up and after you commit.

If the event or race coordinators are organized, you’ll probably receive regular updates before the event so you can fully understand the details. You may also receive updates throughout the event (if it is a conference, for example, or week-long yoga-surf-retreat).

Joining a Note Partnership is very similar.

As a partner, you’ll receive information about the asset prior to the purchase and regular updates on the activities associated with Note management after the deal closes. Lucky for you, you don’t have to field phone calls from tenants or make a midnight trip to fix a toilet.

In fact, you can sit back and relax (perhaps plan for that big race or event coming up) while we handle the day-to-day management of the Notes.

Let’s dive deeper to cover the communications you can expect before and after you have joined a note investing partnership.

If you want a quick review of how Note investing works, check out our Ultimate Guide to Note Investing series!

Typical Note Investing Partnership Communications and Touchpoints

There are 2 phases of Note partnerships.

1. Note Due Diligence and Purchase
2. Note Management and Sale

You should expect specific communications during each of these phases so you can both understand the specific assets the partnership will purchase as well as the asset management activities.

Phase 1: Note Due Diligence and Purchase Communications

Phase 1 is broken into 3 steps that take from 2-4 weeks to complete:

1. Submit Letter of Intent for Capital Commitment
2. Review Due Diligence Report and Asset Summary
3. Sign paperwork and transfer funds.

Step 1: Letter of Intent for Capital Commitment

First, you will send us a Letter of Intent with the amount you want to place in Notes. This signals us to find specific assets to analyze and present to you. 

Step 2: Due Diligence Report and Asset Summary

Second, we’ll prepare a Due Diligence Report and Asset Summary that provides details to the specific assets we have available and why we think they are worth purchasing. We’ll touch upon our 3 due diligence areas: the physical asset value, the quality of the documentation, and the likelihood of the borrower being able to make payments.

We will present this Report to you after we make our initial offer. Our industry demands a tight turn-around for our initial offer. You’ll have the opportunity to review the Asset Summary, but we have already determined it is a good deal that fits without our narrow criteria for purchase. We’ll be diving even deeper into due diligence at this point and can adjust our offer if we find a reason. We’ll then present the full Report to you again with any revisions we’ve made to our offer.

The Note industry is small and we highly value our relationships. For this reason, we want our Sellers to be able to trust that when we make an offer, we stand by that offer (unless we find reason to alter it in our due diligence process). For this reason, we ask that if you have any reason to change your mind, that you do it before we make our initial offer.  

Step 3: Sign Partnership Paperwork and Transfer Funds

Once we have confirmation of an accepted offer, you’ll sign the partnership paperwork and transfer funds. We’ll provide you these documents earlier so that you have plenty of time to read them. We will then confirm the asset purchase the asset and begin the onboarding process for Phase 2.

Phase 2: Note Management and Sale Communications

During Phase 2, we will move the Note through our process to get it re-performing. During this process you’ll receive 4 types of communications:

• Note Partnership Guide – upon closing
• Progress and Financial updates – monthly
• Special Discussion Alerts – several times throughout the partnership duration
• Schedule K-1 – annually

Upon Note Closing

Upon the close of a Note purchase, you should expect an email notification letting you know that the deal has closed and hard collateral materials have been received. Included in this guide will be an overview of what to expect in the following months, some frequently asked questions, and next steps.

We will also provide a link to the Activity Log for your Note. This is a record of actions taken to manage the Note for your reference at any time. You’ll also be sent monthly updates that summarize these actions.

While the Activity Log might not be the most fun thing to look at, especially if you’re not a spreadsheets nerd, you should definitely take a closer look. Even a quick scroll will provide you great insight as to the ongoing progress of the Note.

Monthly Progress Reports

Each month thereafter, you should expect an email update on the progress of the Note management as we pursue our top exit strategy: re-performing the note. This email will summarize any actions taken.  

If your Note is re-performing and the borrower is making monthly payments, then you will receive monthly distributions as well. 

The monthly email will likely contain any outreach made by our services, any actions taken by our borrower, and whether progress is in line with the business plan.

Here’s an example: 

Example Monthly Progress Update Email

Progress continues to go well for the management of [PHYSICAL ADDRESS] as we execute our business plan.

Here are some specific note updates:

• Contact made with borrower, willing to consider new terms.
• New terms sent to borrower.
• Paperwork drafted for New note agreement with borrower.

Future action anticipated:

Over the next month we anticipate negotiating terms with borrower and requesting signatures for new loan modification documents. If the borrower does not agree to terms, we will initiate conversations about alternate exit strategies.

As you can see, the monthly emails are mostly anecdotal and include a quick, high-level overview of progress in moving the note from Non-Performing to Performing or Sale. Specific details for loan modification terms and other financial reporting will also be provided in monthly updates.

Special Decision Alerts

Occasionally, you’ll receive a link to schedule a call with us for special management discussions. These are regarding bigger discussion topics such as altering our exit strategy or deciding to tell. These calls are what make this an “active” investment for our capital partners. We’ll discuss our decision and you can weigh-in and ask any questions. 

We don’t believe “active” should be mistaken for lots and lots of your time. 

We also love these calls because it is also a chance for us to check-in and answer any questions you may have. There are typically only a few of these calls throughout the life of the partnership.

Annual K-1

Each year during tax season, you should be on the lookout for a Schedule K-1. This tax document gets issued for partnership-type investments, like note partnerships, and reports your share of the income, deductions, and credits. 

The K-1 is issued for every investor in the deal and is typically available around the same time as 1099s, serving a similar purpose for tax reporting. 

Note Partnership Communications Recap

Your active participation in a Note Partnership is heavily weighted to Phase 1 and vetting the Note operators before even deciding to partner. You’ll want to review the Due Diligence summary and take the time to ask questions. Once you review and sign the partnership agreement paperwork and send in your funds, you will mostly just receive regular updates.

Your operator partner will begin executing the business plan at this time (on-boarding the Note with the Servicer, initiating borrower communications, negotiating terms, and more).

Your participation in Phase 2 should consist of several email responses. You’re welcome to ask questions at any time. 

As a summary, in Phase 1 you should expect to see:

1. Letter of Intent for Capital Contribution.
2. Due Diligence Report and Asset Summary
3. Partnership paperwork and fund transfer instructions

In Phase 2, you should expect to see these types of communications:

1. Note Partnership Guide – upon closing
2. Progress and Financial updates – monthly
3. Special Discussion Alerts – several times throughout the partnership 
4. Schedule K-1 – annually

We believe that growing your money in Notes is one of the best ways to accelerate your wealth building with velocity and make an incredible positive impact in the lives of our borrowers. While Note Partnerships are technically considered “active” investments, we aim to make your experience seamless and easy without taking much of your time. Because you have better things to do in this life (did someone say yoga-surf retreat?).