Note Course Bonus: Why Should A Note Holder Take A Discount?
Published: Tue, 06/10/08
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Hello again ,
It's very difficult to buy a note from someone who doesn't
understand that future payments are discounted. In this Note Course
Bonus Lesson (following the announcement from the Rainmaker Series)
I'll tell you one of the best ways I know to convince them.
Cheers,
Bill
W. J. Mencarow
Editor of The Paper Source Journal
www.PaperSourceOnline.com/subscribe.html
www.cashflows.org
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(adv.)
A Special Announcement From The Rainmaker Series!
In our continuing effort to provide quality low cost education,
starting in February 2008, the Rainmaker Series will begin helping
people learn about the cash flow investing through interactive
learning sessions via webinars.
David Butler and his successful students will teach about the
cashflow business from the comfort of your own home. There will be
webinars for those who are just beginning, and intermediate
students, as well. We have also put together additional webinar
specifically designed to help you grow your note business. To
attend one or all of the webinars, just visit:
www.mckinvestments.com/Rainmakers
Notes & Bolts - The fundamentals of the discounted note business.
February - 5th & 12th
March - 4th & 11th
I'm not selling; I'm buying - Stop selling and grow your business
fast!
February - 13th, 20th, & 27th
March - 12th, 19th, & 26th
Deal Maker - Don't just find deals; make them happen!
April 7th, 14th, 21st, 28th
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"WHY SHOULD I TAKE A DISCOUNT?"
By W. J. Mencarow
It's very difficult to buy a note from someone who doesn't
understand the time value of money.
Most people cannot understand why they shouldn't get (as an
example) $10,000 for their $10,000 mortgage note. "After all,"
he might say. "It says $10,000 right on it."
Since you are offering him less for his note than what he thinks
is "fair," many times the note holder just won't trust you.
Often, I have found the following approach to be successful:
Pull out a $10.00 bill and a $100.00 bill. Offer him his choice:
the $10.00 bill right now or the $100.00 bill six months from now.
Most people will choose the $100.00 six months from now.
Then say, "how about the $10.00 now or the $100.00 year from now?"
If he still says he'll take the $100.00 a year from now, keep
increasing the time it will take for him to get the $100.00 until
he chooses to take the $10.00 bill now.
Your response: "You now understand the time value of money.
Actually, you understood it all along. We all do, it's just that
most of us haven't put that name to it. You have told me that a
$10.00 bill now is worth more than a $100.00 bill a year (2 years,
5 years, whatever he chose) from now.
"So the important factor is not what amount is printed on the piece
of paper -- whether it is a dollar bill or a mortgage note -- but
WHEN YOU GET THE MONEY."
"Your note has $10,000 written on it, just like this bill has
$100.00 written on it. But your note is like this $100.00 bill
that you don't get for a long time. It's value depends on when it
is paid off."
So he doesn't think you are trying to trick him, point out (before
he does) that his note provides monthly payments and the $100.00
bill doesn't. Tell him that is why it is more valuable than a note
that does not have any monthly payments, and you will pay him more
than you would for such a note (there are such things, of course --
balloon notes, where all the payments plus interest accrue to be
paid in one lump sum at the end of the term).
Don't get into detail. Don't try to impress him with what you
know. That's not why you are there. You have a choice: You can
impress him with how knowledgeable you are, or you can buy his note.
Keep it simple. You have one job to do in this mission: You must
make him understand that it doesn't matter what is printed on the
piece of paper -- whether it is a $100.00 bill or a mortgage note
-- what matters, what determines value, is WHEN THE MONEY IS PAID.
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Salt Lake City
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