In every market cycle, the same question comes up:
“Which notes offer the best returns right now?”
Not the academic answer. Not the broker-fluff answer.
The real answer — the one seasoned buyers use when they’re wiring money, not theory.
Today’s environment (2024–2025) is defined by:
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higher interest rates
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tighter credit conditions
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more distressed borrowers
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rising servicing costs
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a smarter, more data-driven buyer base
So here’s the truth — and it’s not one-size-fits-all. Different note types produce very different return profiles, risk levels, and workload. Let’s break it down.
✅ 1. Performing Notes (PN): Safe, Predictable, and Perfect for Yield Buyers
What they are:
Borrower is making monthly payments on time or near-time.
Why buyers like them:
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Stable cash flow
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Low servicing friction
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Institutional-friendly
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Best for retirement accounts (SDIRAs, 401k rollovers)
Typical Yield:
6% – 12% (after acquisition discount and servicing)
Best for:
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Investors who want mailbox money
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Buyers who don’t want to call borrowers
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Wealth managers & financial planners
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Funds who need predictable returns
Reality check (Don of Debt style):
Performing notes won’t make you rich — but they won’t blow up in your face either.
You’re buying the borrower, not the discount.
✅ 2. Non-Performing Notes (NPN): High Risk, High Reward, High Strategy
What they are:
Borrower has stopped paying (30–180+ days delinquent).
Why buyers chase them:
You’re buying the story + the collateral + the upside.
Top outcomes:
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Loan modification
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Lump-sum settlement
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Foreclosure / deed-in-lieu
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Collateral disposition
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Reperforming conversion
Typical Yield:
15% – 35%+ depending on exit strategy, cost basis, and speed of resolution.
Best for:
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Experienced note investors
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Buyers who understand servicing + loss mitigation
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Operators comfortable with foreclosure timelines
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People who aren’t scared to get hands dirty
Reality check:
NPNs don’t reward emotion — they reward discipline + legal knowledge.
Some deals print money.
Some deals become expensive paperweights.
Skill is the differentiator.
✅ 3. Partial Notes: The Most Underestimated Play in the Market
What they are:
Buyer purchases part of the payment stream, not the whole note.
Example: Buyer pays for 60 months of payments, after which the note reverts back to the seller.
Why they’re powerful:
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Seller keeps long-term upside
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Buyer earns attractive yield with reduced risk
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Perfect for performing or reperforming paper
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Lower capital commitment
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High predictability of returns
Typical Yield:
8% – 15% depending on structure and seasoning.
Best for:
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Sellers who want liquidity now but don’t want to give up full note value
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Buyers who want fixed-term, lower-risk cash flow
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Investors who want control without full exposure
Reality check:
Partials are engineering — not gambling.
Done right, they create win-win structures that outperform traditional note sales.
✅ So Which Note Type Delivers the Best Returns Today?
Here’s the Don-of-Debt breakdown:
For high yield (15–35%+):
Non-performing notes — if you have the operational muscle.
For safe, predictable returns (6–12%):
Performing notes — especially long-seasoned, low-LTV, stable borrowers.
For balanced risk + flexibility (8–15%):
Partials — often the smartest structure for both sides.
✅ The Real Secret: Your Returns Depend on You, Not the Note
Most buyers don’t lose money because they bought the wrong type of note.
They lose money because they bought something they weren’t built to manage.
Ask yourself:
1. Do I have servicing experience?
If no → avoid NPNs until you have a partner or platform.
2. Do I want cash flow or backend profit?
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Cash flow → Performing
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Backend equity → NPN
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Split → Partials
3. Can I handle legal timelines, collateral review, and borrower outreach?
If not → get help or stay in the performing lane.
4. Do I want passive income or active strategy?
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Passive → PN
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Active → NPN
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Hybrid → Partials
✅ Final Word: The Opportunity Right Now
Today’s market rewards buyers who understand risk, structure, and data.
Not bargain hunters.
Not emotion buyers.
Not spreadsheet cowboys.
Your competitive edge is simple:
Right price. Right structure. Right servicer.
And a mindset built on strategy — not luck.
Want help evaluating a performing, non-performing, or partial note?
I’ve analyzed thousands.
Send the file — I’ll give you the real read.
—
Jeffery Hartman
Don of Debt | Fitzgerald Advisors
Debt Buyer • Note Strategist • Portfolio Architect
What are performing notes and why are they considered safe and predictable for yield buyers?
Performing notes are loans where the borrower is making timely or near-time payments, offering stable cash flow, low servicing friction, and suitability for institutional investors and retirement accounts.
What are non-performing notes and what potential outcomes can an investor expect from them?
Non-performing notes are loans where the borrower has stopped paying for 30 to over 180 days, and investors can pursue outcomes such as loan modifications, lump-sum settlements, foreclosures, collateral disposition, or reperforming conversion.
What are partial notes and why are they considered an underestimated market strategy?
Partial notes involve buying part of the payment stream rather than the entire note, allowing sellers to retain long-term upside and buyers to earn attractive, lower-risk yields, making them a smart, engineered approach for balanced risk and reward.
Which note type currently offers the best returns in 2024-2025?
Non-performing notes offer the highest potential yields, often between 15% and 35%+, provided the investor has operational expertise, while performing notes are ideal for predictable returns, and partial notes offer a good balance of risk and flexibility.
How do I determine which note type is suitable for my investment strategy and risk tolerance?
Assess your experience with servicing, your need for cash flow versus backend profit, your ability to handle legal and collateral processes, and whether you prefer passive or active management, to select the note type aligned with your skills and investment goals.
