Can I buy a performing commercial mortgage note (not just non-performing)?

Yes. Performing note purchases are common in portfolio rebalancing transactions and secondary market sales. Performing notes trade at much smaller discounts (or even at par) and the buyer's return comes from the interest yield on the note rather than a discount-to-value arbitrage. This is a different investment strategy (fixed-income like) than the equity-upside note-to-own strategy applicable to non-performing notes.

What is the difference between buying a first mortgage note versus a mezzanine note?

A first mortgage note is secured by a lien on the real property itself, a traditional mortgage or deed of trust. A mezzanine note is secured by a pledge of the equity interests in the property-owning entity (the LLC membership interests), not by a direct lien on the real estate. Mezzanine notes are more complex to enforce (UCC Article 9 process rather than real estate foreclosure), but mezzanine note foreclosure can be completed faster (as little as 30-45 days in cooperative situations).

Is note purchase legal in all states?

Yes, commercial mortgage note transfers are governed by the UCC and state contract law, and are fully legal in all U.S. jurisdictions. However, the mechanics of enforcing notes (foreclosure procedures, required assignments, notice requirements) vary by state. Always use counsel licensed in the state where the collateral is located.

What happens to the existing property management when I buy the note?

Nothing immediately, until you complete a workout or foreclosure, the borrower and their management team remain in control of the property operations. As the new note holder, you have lender rights (enforcement, modification) but not property management rights. Physical control of the property transfers to you only after foreclosure is completed or a deed-in-lieu is executed.

How do I find non-performing commercial mortgage notes for sale?

Note broker networks (Mission Capital, Stonehill Capital, and regional specialists); direct bank workout department relationships; FDIC failed bank asset listings; note sale conferences (note investor conferences, distressed debt conferences); and networks of commercial attorneys who represent note sellers. OffMarketX lists catalyst-driven commercial real estate including note sale opportunities where the note seller has retained the platform to identify qualified buyers.

What Is a Commercial Real Estate Note Sale?