Real Estate Notes Investing (2026): Types, Law and 26 Issuers

Two products sold under one name

Search for “real estate notes” and the results mix two things that share a word:

1. A mortgage note. One borrower signed a promissory note and gave the lender a mortgage or deed of trust on a property. You buy that one loan, performing (the borrower pays) or non-performing (the borrower has stopped), and you collect, modify or foreclose through a servicer.
2. A note or bond from a lender or platform. A company borrows from many investors by selling them notes or bonds, then lends or owns property with the money. Groundfloor Notes, Connect Invest Notes, Compound and Worthy bonds, Red Oak bonds and Bequest Bonds are in this group. You do not own any mortgage. You own a claim on the company.

What a promissory note secured by real estate is, in law

A promissory note is the borrower's promise to pay. The mortgage or deed of trust is the security. In Carpenter v. Longan, 83 U.S. 271 (1872), the Supreme Court wrote: “The note and mortgage are inseparable; the former as essential, the latter as an incident.” (our reading: the debt is the asset, and the lien follows it.)

Whether the note can be bought and sold freely is a question of state commercial law. Article 3 of the Uniform Commercial Code, as enacted in Delaware (6 Del. C. § 3-104), defines a “negotiable instrument” as “an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order”, payable to bearer or to order, on demand or at a definite time. Article 9 reaches the sale itself: it applies to “a sale of accounts, chattel paper, payment intangibles, or promissory notes” (6 Del. C. § 9-109(a)(3)). Each state enacts its own version, so the exact words in the state where the property sits govern (our reading).

A buyer of a home loan takes on federal duties that a buyer of a business-purpose note usually does not:

• Tell the borrower. Under 15 U.S.C. § 1641(g), the new owner of a mortgage loan must notify the borrower in writing “not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party.” The statute defines “mortgage loan” as “any consumer credit transaction that is secured by the principal dwelling of a consumer.” Regulation Z repeats the 30-day clock for its transfer disclosures (12 CFR 1026.39(b)).
• Use a servicer who can foreclose. Under Regulation X, “A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless: (i) A borrower's mortgage loan obligation is more than 120 days delinquent” (12 CFR 1024.41(f)(1)), with two exceptions for due-on-sale violations and for joining another lienholder's foreclosure.

These sources do not say what a non-performing note costs, how it is priced, or what a buyer recovers; that information sits in private marketplaces and we found no public database of it. The one public example we found of a retail-facing issuer buying whole mortgage notes is Bequest Bonds I, below.

When a note is a security: Reves, and the door that decides who can buy

Congress defined “security” to include “any note” (15 U.S.C. § 77b(a)(1)), and the Exchange Act excludes any note “which has a maturity at the time of issuance of not exceeding nine months” (15 U.S.C. § 78c(a)(10)). The Supreme Court's test for the rest is Reves v. Ernst & Young, 494 U.S. 56 (1990). It starts from a presumption: “we begin with a presumption that every note is a security.” It then says the presumption “may be rebutted only by a showing that the note bears a strong resemblance (in terms of the four factors we have identified) to one of the enumerated categories of instrument.” The list it quoted from the Second Circuit includes “the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets”, and the Court said: “We agree that the items identified by the Second Circuit are not properly viewed as ‘securities.’” On the nine-month exception, the Court wrote that it “express[ed] no view on how that exception might affect the presumption.”

Our reading of the two together: one mortgage note on a home, sold from one lender to one buyer, sits on the non-security side of the line. A company that sells notes to a broad public to raise money for its business, as Groundfloor, Connect Invest and Bequest do, sits on the security side, and must register or use an exemption. The exemptions are where retail access is decided:

• Regulation A, Tier 2 lets anyone buy, but for a non-accredited buyer the purchase price may be “no more than ten percent (10%) of the greater of such purchaser's” annual income or net worth (17 CFR 230.251(d)(2)(i)(C)).
• Rule 506(b) allows no more than 35 purchasers in any 90 calendar days, and each non-accredited purchaser must be able to evaluate the investment alone or with a purchaser representative (17 CFR 230.506(b)(2)). Rule 506(c) requires that “All purchasers of securities sold in any offering under paragraph (c) of this section are accredited investors” (17 CFR 230.506(c)(2)(i)).

What the private side looks like in Form D data

We counted new Form D notices filed in calendar 2025 in the SEC's Form D data sets (script saved). Of 34,717 new notices across all industries, 4,695 were in real estate industry groups (Commercial, Residential, Other Real Estate, REITS and Finance, Construction). 374 ticked the Debt box, and 240 ticked Debt without Equity or a pooled fund. Among those 240, 157 relied on Rule 506(b), 80 on Rule 506(c), and 24 reported non-accredited investors. The 240 had sold $599,270,924 at the date of their notices (our sum over notices with a numeric figure). Issuers that tick “Pooled Investment Fund” or another industry are not in these counts (our classification), so this is a floor, not a market size.

EquityMultiple's Alpine Notes are in the 506(c) group: EM Alpine, LLC's Form D/A of April 14, 2025 reports $347,901,072 sold to 1,701 investors under Rule 506(c), which means accredited investors only; see our Alpine Notes review.

26 issuers: what their latest annual reports say

Method. Twelve phrase searches in EDGAR full-text search over Forms 1-K, 1-A, 1-A POS and 253G2 filed from July 1, 2025 to October 13, 2026 returned 250 distinct filers. We matched them to their latest Form 1-K and kept the 26 whose Regulation A securities are notes, bonds or limited recourse obligations and whose business is lending against, or owning, real estate (our judgment; a keyword screen can miss issuers). A going-concern flag means the 1-K contains a sentence stating that substantial doubt exists, not the standard auditor boilerplate (our script, saved with its output). USA Opportunity Income One was not in the search results; we added it from our earlier census, and its latest 1-K is for 2024 because it now files 10-Qs. Thirteen of the 26 were already in our real estate bonds census (Compound, Worthy, GK Real Estate, MCI, USA Opportunity and the Red Oak funds VI, VII and Intermediate); the 13 below are the ones that page does not cover.

Result: 16 of 26 contain a going-concern statement; Red Oak Capital Fund III is under liquidation accounting; the remaining nine do not carry a statement (GK Investment Holdings, GK Investment Holdings III, Red Oak Capital Fund VI, Red Oak Capital Fund VII, Red Oak Capital Intermediate Income Fund, MCI Income Fund VII, Connect Invest II, Connect Invest III and PFG Fund V).

Red Oak Capital Fund III: the bond default most note guides leave out

Red Oak Capital Fund III raised $50,000,000 in two series of bonds (our sum of $4,386,000 and $45,614,000) and used the proceeds “to invest primarily in unsecuritized senior commercial mortgage notes, or property loans.” On February 3, 2025 it announced it would stop regular quarterly interest payments; on March 10, 2025 the indenture trustee issued a “Notice of Events of Default and Reservation of Rights”; on November 21, 2025 the company entered a forbearance agreement and, from December 1, 2025, switched to liquidation accounting. At December 31, 2025 it showed total liabilities of $71,357,600 and net liabilities in liquidation of $49,959,789; unpaid and estimated bond interest came to $11.2 million. In its Form 1-SA for the six months to June 30, 2026, it estimated assets of $19.1 million against liabilities of $68.3 million and wrote: “The Company does not expect to have sufficient assets to fully satisfy all of its outstanding obligations, including the full amount of principal and accrued interest due to Series B bondholders.” The Form 1-K of Red Oak Capital Fund Series reports that bonds of ROCF II Series were exchanged into new 9.5% bonds ($36.8 million, about 80% of the series) and that ROCF IV Series has a going-concern statement and issued a notice of default to a mortgage note borrower after a February 28, 2026 maturity date. Nothing here says every Red Oak fund is in trouble: Red Oak Capital Fund VI, VII and the Intermediate Income Fund carry no going-concern statement in their latest 1-K.

Platform notes: Groundfloor and Connect Invest

Groundfloor Notes are issued by Groundfloor Yield, LLC. Its 1-K says “Stairs Notes are secured by a first-priority security interest in the assets of the Company, which consists principally of the intercompany receivables owed to the Company from Groundfloor.” Groundfloor Yield had $88,377,505 of notes outstanding at December 31, 2025 and $108,852,738 at June 30, 2026 (up $20,475,233, our arithmetic), and total assets of $117,836,838 against liabilities of $112,475,380. Groundfloor Loans 1, LLC and Groundfloor Loans 2, LLC are not note issuers: their 1-Ks list “COMMON SHARES” as the security sold under Regulation A. Both Groundfloor Yield and its parent report substantial doubt about going concern; the parent's accumulated deficit was $64,756,637, and loans moved into real estate owned at $26,105,674 in 2025 ($22,064,012 in 2024). As of October 13, 2026, EDGAR lists no Form 1-SA from Groundfloor Finance Inc. for the six months to June 30, 2026 (our check of the filing list), although Groundfloor Yield filed one on October 1, 2026. The product-level comparison is in Groundfloor Notes vs LROs and our Groundfloor Notes review.

Connect Invest II sold Series B (12 months, 8.00%, $13,203,991) and Series C (24 months, 9.00%, $24,699,070) notes, plus $23,701,832 of discontinued Series A. Its 1-K calls the notes “unsecured, general recourse obligations of the Company.” The company lends through Ignite, a related party that originates and services its loans, and one of its investment guidelines is “Generally, the first lien status of the real estate loans.” Connect Invest's website (read October 13, 2026) says “Each Note is backed by real estate” and “Every Note holds first-lien security.” Reading the two together (our reading), the first liens are on the loans the company makes, and the noteholder's claim is against the company. At December 31, 2025 the issuer's liabilities were $31,763,078 against assets of $30,909,144, with a net loss of $629,988 after a $866,977 provision for credit losses. The 1-K also gives the sponsor's own record: Ignite funded about $1.3 billion of loans in five years, and the 1-K states: “The default rate on Ignite’s real estate loans over the five years ended December 31, 2025 is approximately $77 million, or 5.95%, with an aggregate loss of principal of $3,852,709 or 0.30%.” That is the sponsor's own figure. Notes outstanding were $37,636,353 at June 30, 2026.

Hard-money funds that borrow from small investors

PFG Fund V sells 8% unsecured promissory notes (up to $75,000,000 in face value) and lends short-term to renovation investors. At December 31, 2025 it had $44,718,645 of investor notes and $38,494,451 on lines of credit against member's equity of $841,213 and total assets of $84,588,062 (equity is about 1% of assets, our arithmetic). It reported $4,459,000 of real estate owned, none a year earlier, and wrote that “five, totaling $3,760,950 are in the foreclosure process.” It earned $1,450,213 in 2025, down from $1,803,281.

Robert Ventures sells unsecured bonds at 8.00% to 10.00% with a ten-year maturity and a lockup of one to three years in which holders “cannot redeem.” At December 31, 2025 it had $1,143,510 of principal, $27,795 of cash, $688,933 of digital assets at fair market value, and liabilities of $3,132,630 above assets of $3,077,108. Norhart Invest had $1,597,900 of promissory notes at 7.6% to 10.0%, an auditor's statement that notes “maturing within one year” left it with “insufficient liquidity on hand to repay the notes,” and filed an exit report on June 1, 2026. PIC Diversification Fund and Wellstreet Realty are new issuers with almost no assets: $6,009 of cash at PIC, $2,233 of total assets at Wellstreet Realty (June 30, 2025), which offers Housing Bonds at 9% APY for 36 months and then 10%.

Bequest Bonds I: bonds that buy whole mortgage notes

Bequest Bonds I is the clearest public case of retail money buying “performing notes”. It invests in “performing, re-performing, and non-performing residential mortgage loans”, funded by unsecured bonds at fixed rates of 5% to 8% a year maturing through 2030. Its filings show the whole path:

• Loans. It bought 22 performing second-lien loans in December 2025 for about $1,499,561. At June 30, 2026 it held 40 loans with $3,363,406 of unpaid principal and a fair value of $2,909,968: 37 performing, two delinquent ($68,546) and one in bankruptcy ($58,207). As of May 19, 2026 its loans carried rates of 7.00% to 14.75%, about 11.1% balance-weighted, against a stated target gross yield of 8% to 14% on directly acquired loans.
• Bonds. Payable to bondholders rose from $4,640,367 at December 31, 2025 to $8,413,633 at June 30, 2026 (up $3,773,266, our arithmetic).
• The rest of the assets. A preferred equity interest in an affiliated fund, Bequest Funds, LLC, was carried at $2,856,540, about 37% of total assets. That fund suspended operating preferred return payments from February through July 2026, and the filing says the affiliates “voluntarily reported to the Securities and Exchange Commission that they used investor capital contributions to fund operating preferred return payments earlier than permitted under their operating agreements.” This is the company's own disclosure.
• The audit. The 1-K/A says the first auditor report, dated May 15, 2026, “contained a disclaimer of opinion because the auditor had been unable to obtain sufficient appropriate audit evidence”; the auditor “reissued its report on September 29, 2026 with an unmodified opinion” and a going-concern section, and the June 30, 2026 filing repeats “substantial doubt about our ability to continue as a going concern.”

None of this is a finding of wrongdoing by anyone. It shows the structure: the bondholder's claim is on a company that began selling bonds on February 1, 2025, and only part of its assets are the mortgage notes the name suggests.

Whole mortgage notes: what public data says about performance

For a buyer of one note, the first public benchmark is how mortgages perform at banks. The Federal Reserve Board's release (data on FRED, series DRSFRMACBS) puts the delinquency rate on single-family residential mortgages booked at all U.S. commercial banks at 1.86% in the second quarter of 2026 (1.88% in the first quarter; seasonally adjusted, end of quarter), against 2.08% in the first quarter of 2007 and a peak of 11.48% in the first quarter of 2010. The charge-off rate on the same loans was 0.00% in the second quarter of 2026, against a peak of 2.8% in the fourth quarter of 2009. Commercial real estate loans excluding farmland stood at 1.53%. The Fed counts as delinquent loans “past due thirty days or more and still accruing interest as well as those in nonaccrual status.”

Two cautions. These are bank loans underwritten by banks; non-performing notes sold to individuals are, by definition, the loans that stopped performing, and the Fed series does not price them. And the best figure a retail-facing issuer gives is its own: Connect Invest II defines a non-performing loan as one “contractually 90 days past due”, and Bequest Bonds I says about 92% of the loans its primary servicer handles, by unpaid principal, were current or under 30 days delinquent on September 30, 2026. Our other pages on how notes start: seller financing and hard money lenders.

What the SEC and FINRA say about promissory notes

FINRA's Investor Insights page, “Promissory Notes Can Be Less Than Promised” (July 5, 2023): “While they can be legitimate investments, many promissory notes sold widely to individual investors are fraudulent.” It adds that “Fraudulent schemes include promissory notes purported to be secured by investments across a broad range of business ventures—from real estate to startups to self-offerings by brokerage firms”, and tells readers: “Don’t trust guaranteed returns.”

The SEC's Investor Tips page “Promissory Note Fraud” (undated; we read it October 13, 2026): “While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams.” It also says: “Be skeptical if the seller tells you that the promissory note is not a security.” The SEC, NASAA, FINRA and SIFMA brochure “Promissory Notes: Promises, Problems” says that “promissory notes that are marketed broadly to the general public often turn out to be scams.”

A recent case shows the pattern in real estate. In Litigation Release No. 26571 (June 24, 2026), the SEC announced settled actions against unregistered sales agents in an alleged scheme by Wells Real Estate Investment, LLC that “raised at least $56 million from approximately 660 investors nationwide through the sales of promissory notes.” The sales agents are described as “not registered as broker-dealers or associated with a registered broker-dealer”; the settlements are without admission of the allegations and subject to court approval.

None of the 26 issuers above is accused of fraud in these sources. The overlap is the warning FINRA gives: check who is selling, whether the note is registered or exempt, and what stands behind the interest rate.

What a reader can do with this

• Decide which product you are buying. One mortgage note you service yourself is a loan to a borrower. A Reg A note or bond is a claim on a company. They fail in different ways.
• Open the issuer's last Form 1-K and 1-SA on EDGAR. Search the company name, then read the auditor's report for the words “substantial doubt”, the balance sheet for liabilities above assets, and the note on related parties. Sixteen of 26 issuers here have that statement.
• Read the security line, not the website. Ask whether the note is secured, by what, and whose assets the lien is on. Compare it with the issuer's 1-K.
• Check the cap. A non-accredited investor in a Tier 2 offering is limited to 10% of the greater of annual income or net worth (17 CFR 230.251(d)(2)(i)(C)).
• For a whole note, price the servicing and the timeline. On a home loan, the 30-day notice to the borrower and the 120-day foreclosure rule apply (15 U.S.C. § 1641(g); 12 CFR 1024.41(f)(1)).
• Check the seller. FINRA's tools are BrokerCheck and your state securities regulator; the SEC's tips say insurance agents cannot sell securities, including promissory notes, without a securities license.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources: Forms 1-K, 1-K/A and 1-SA of the 26 issuers read on EDGAR on October 13, 2026, including Groundfloor Yield, LLC (0001104659-26-038351, 0001104659-26-112785), Groundfloor Finance Inc. (0001104659-26-038396), Connect Invest II LLC (0001171520-26-000076, 0001171520-26-000278), Connect Invest III LLC (0001171520-26-000070), PFG Fund V, LLC (0001731122-26-000637), Robert Ventures Holdings LLC (0001096906-26-000619), Bequest Bonds I, Inc. (0001213900-26-106851, 0001213900-26-107666), Norhart Invest LLC (0001213900-26-047530), Red Oak Capital Fund III, LLC (0001654954-26-004153, 0001213900-26-104829) and Red Oak Capital Fund Series, LLC (0001654954-26-004188); the census script output; SEC Form D data sets 2025Q1 to 2025Q4 (www.sec.gov/dera/data/form-d); Federal Reserve Board delinquency and charge-off series (FRED DRSFRMACBS, CORSFRMACBS, DRCRELEXFACBS, updated August 25, 2026); Reves v. Ernst & Young, 494 U.S. 56 (1990) and Carpenter v. Longan, 83 U.S. 271 (1872) from the Library of Congress U.S. Reports; 15 U.S.C. 77b, 78c and 1641; 17 CFR 230.251 and 230.506; 12 CFR 1024.41 and 1026.39; 6 Del. C. 3-104 and 9-109; FINRA Investor Insights (July 5, 2023); the SEC Investor Tips, the SEC, NASAA, FINRA and SIFMA brochure and SEC Litigation Release No. 26571 (June 24, 2026); and connectinvest.com (October 13, 2026). Sums are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.