Invest in Non-Performing First Mortgage Notes with Gelt Financial
For accredited investors only.
You can invest in non-performing mortgage notes with Gelt Financial if you are an accredited investor, and we invest our own capital alongside you. This page shows our terms, how investors get paid, the risks, and the forms you need. We wrote it for accredited investors and self-directed IRA holders who want distressed debt backed by first liens on commercial property and residential investment property.
Higher potential yield comes with a longer wait and no monthly payments, so the details matter before you commit.
Request investor information or phone 561-221-0900.
Why Do Investors Choose Gelt Financial for Non-Performing Notes?
We are a family-owned direct lender and servicer. Jack Miller founded Gelt Financial in 1989, and we have closed more than 10,000 mortgage loans since. We keep our terms honest, with no hidden fees, and we put our own money into the notes we offer you.
We service every note in-house. One team tracks the borrower’s payment history, sends default notices, and manages the legal process. Have questions? Call us at 561-221-0900, and our team will help.
What Is a Non-Performing Mortgage Note?
A non-performing mortgage note, also called a non-performing loan, is a loan where the borrower defaults on the loan agreement. A default can mean missed payments, a maturity default when a balloon payment comes due unpaid, or another breach of the loan terms. Many banks label a note non-performing at 90 days past due, but any breach can qualify.
The note holder owns the right to collect and the lien on the underlying property. A performing note pays on schedule and carries less risk. A non-performing note does not, so the purchase price can sit at a steep discount to the unpaid principal balance.
Why Can Non-Performing Notes Offer Higher Potential Yields?
Three things can lift yield: a discounted rate of entry, default interest, and an equity cushion. Higher potential yield also means higher default risk. Mortgage notes can yield returns between 12% Plus
Do investors buy at a discount?
Yes. A lender that wants distressed assets off its balance sheet sells below the loan balance. If the note resolves near the full amount, the gap becomes your return.
Does default interest add to the return?
It can. Many loan agreements charge a higher interest rate after default. That rate adds to the amount owed, but collecting it is never certain. Default rates are usually 18% to 24%.
How does the property protect principal?
The underlying property secures the note. We buy up to 65% loan-to-value and average 55%. That leaves room if property value falls or the foreclosure process takes time.
How Do Investors Earn a Return on a Non-Performing Note?
Every note ends when the borrower pays, the property sells, or we sell the note. The main paths:
When Do Investors Get Paid on a Non-Performing Note?
There are no monthly payments. We pay principal and return in one payment when the note resolves, typically in 1 to 2 years. A note in default is not paying, so it cannot send monthly payments. This mortgage note investment is a patient investment strategy, not passive income.
How Do Non-Performing Notes Compare With Performing Notes?
| Performing mortgage notes | Non-performing mortgage notes | |
|---|---|---|
| Where the return comes from | Interest payments | Discount, default interest, and the resolution |
| When cash arrives | Monthly | At resolution |
| Main risk | Lower risk: the borrower stops paying | The resolution takes longer or costs more |
| Servicing demands | Steady and low | Event-driven and high |
| Entry price | Near the unpaid principal balance | Below the balance |
| Best fit | Investors who want steady income | Investors who accept more risk and can wait |
Prefer steady payments? See our first trust deed investing page.
How Does Gelt Financial Invest in Non-Performing Notes?
We buy individual notes one at a time and pass on any that fail our review. Some investors call this cherry-picking. Banks, credit unions, and other lenders sell mortgage notes to us, and we purchase notes only when they pass our review. Investors who want to buy mortgage notes alone must source, underwrite, and service them. When you purchase mortgage notes with us, we do that work.
What do we buy?
First liens only, on commercial property and residential investment property.
What do we not buy?
Land, rural property, construction, development, heavy rehab, assisted living, and specialty property.
Who services the note, and do we invest too?
We service in-house, and we invest our own capital alongside investors.
What Are the Investment Terms?
| Term | Value |
|---|---|
| Eligibility | Accredited investors only |
| Minimum investment | $25,000 |
| Target return | 15% plus, mid-teens on average. A target, not a guarantee. |
| Maximum loan-to-value | 65% |
| Average loan-to-value | 55% |
| Lien position | First liens only |
| Typical hold | 1 to 2 years |
| Distributions | None monthly. Principal and return paid at resolution. |
| Servicing | Gelt Financial, in-house |
| Retirement accounts | Self-directed IRAs accepted |
| Fees | Disclosed in writing before you invest |
Ready to move fast? Call us at 561-221-0900 for the full terms.
How Do We Protect Investor Capital?
What diligence documents do you receive?
The key components arrive in one file:
Each legal document comes from the original lender or the last servicing transfer.
What Are the Risks of Investing in Non-Performing Notes?
- Loss of principal.
- Longer timelines and higher legal costs.
- Falling property value as market conditions shift.
- Borrower bankruptcy and litigation.
- Property taxes, insurance advances, and property management costs.
- No monthly income.
- Illiquidity until the note resolves.
- Rising interest rates can decrease the market value of existing notes.
Documentation flaws in non-performing notes can severely impact legal recovery options. Target returns are never guaranteed.
How Can Investors Buy Non-Performing Notes?
Mortgage note investing sits outside the stock market and mutual funds as one of the asset classes investors can add. Notes for sale come from banks, credit unions, hedge funds, note brokers, online marketplaces, and private sellers who used seller financing. Those who sell notes this way rarely offer the same level of detail.
- Investors can purchase non-performing notes starting from $25,000 in funds.
- Non-performing notes often trade at discounts of unpaid balance.
- Non-performing notes can yield returns of 18% to 24%.
| Route | Who underwrites | Who services | Investor effort |
|---|---|---|---|
| Banks and credit unions | You | You or a servicer you hire | Highest |
| Note brokers | You, using the broker’s data | You | High |
| Online marketplaces | You | You | High |
| Funds | The manager | The manager | Lowest |
| Gelt Financial | We underwrite first liens | We service in-house | Moderate |
What Should You Ask Before You Invest in Non-Performing Notes?
Ask any mortgage note investor these questions to make informed decisions:
- What is your track record, including losses?
- What loan-to-value do you buy at?
- Which lien position do you hold?
- Who services the note?
- What fees apply?
- When can I get my money back?
Our answers sit in the terms table above.
Who Can Invest?
Accredited investors only. The accredited investor definition covers qualifying individuals and entities. The Investor.gov glossary explains the term.
We accept self-directed IRAs. Read about investing with a self-directed IRA. IRAs face prohibited transaction rules, so ask your custodian first.
How Do I Get Started?
- Request investor information.
- Verify your accredited status.
- Review the note packet and participation documents.
- Decide note by note.
- Fund your investment.
Not sure which fits? Call us at 561-221-0900 and tell us about your investment strategy.
Where Are the Investor Forms, Documents, and FAQ?
Start with the investor interest form. After first contact, we share accredited verification, the participation agreement, and subscription documents. Current investors log in to the Mortgage Investors Information Center. We never post wire instructions publicly.
Who Is Jack Miller?
Jack Miller founded Gelt Financial in 1989 and still leads our family-owned firm as President. He writes and reviews our investor content.
Disclosures
Investing involves risk of loss. Target returns are not guaranteed, and past results do not predict future results. We offer these opportunities to accredited investors only. Nothing here is legal, tax, or investment advice.
Anyone ready to invest in non-performing mortgage notes can start with a conversation. Call us at 561-221-0900 today! Gelt Financial is ready to discuss your financing needs for commercial or investment real estate.