The note is a written, signed agreement between the lender and the borrower, where in the borrower promises to repay the loan. The promissory note includes details such as the name and address of the lender and the borrower, the loan amount, the interest rates, the frequency of the repayment as well as the amount to be repaid in each installment, the tenure of the loan, prepayment penalties if any.

The borrower usually transfers his property {held in trust} to an independent third party. The third party holds the conditional title
For the lenders sake and has the power to re-convey the deed once the loan has been repaid in full as per the agreement as well as having the power to dispose the property should the borrower default on his payments. This process is termed as foreclosure; it can be judicial or non-judicial as per the desire of the lender.

Real Estate Investing In Notes and Trust Deeds;
It is rather a risky investment; therefore, investors need to find a reputable, experienced mortgage loan broker. They have to check the market value as well as the equity of the property to be used as collateral making sure the loan-to-value ratio is favorable; check the borrowers' credit records and profile to ascertain they are low risk investments. Escrowing the processes involved in granting of the loan or the procurement of the note is another important detail to be noted. Checking with the insurance company to what extent the lender is covered will be prudent. A detailed description of the property, its location, market value, pending lawsuits against the property if any, if any other lien exist against the property etc. has to be carefully researched and analyzed. Hiring good escrow agents who are licensed by the department of corporations is crucial.

Investors have to take necessary action incase the borrower defaults and foreclosure of the property is the only option left. It could be a problem if there is a senior lien on the property. Make sure that the property does not have senior lien when you procure the trust deed. If there is a senior lien, make sure your foreclosure date precedes it. Foreclosure if done judicially may take 3 to 4 months where as if done privately may be accomplished within 30 days. Many people have profited in real estate by investing in notes and trust deeds.

There are firms that sell services as well as products to help you with investing in real estates through notes and bond deeds.