Finding Notes At The Dentist's Office!
Published: Tue, 02/10/09
February 10, 2009
In This Issue:
* PAPER SOURCE Registry of Investors New Edition
* No Hard Times Here: Why The Future Is Bright For Note
Brokers & Investors
* Did Subprime Mortgage Cause The Panic?
* Finding Notes At The Dentist's Office
Hello again ,
The next time you go to the dentist, why not buy some notes?
If you don't know how to do that, keep reading. Del Ashby has
some very interesting ideas!
Cheers,
Bill
W. J. Mencarow
President, The Paper Source
www.PaperSourceOnline.com
www.cashflows.org
P.S. The 18th annual print edition of THE PAPER SOURCE REGISTRY OF
NOTE INVESTORS will be published in March and sent to all PAPER
SOURCE JOURNAL subscribers. As anyone who has been in the cashflow
industry for more than a hour knows, the Registry is where note
buyers and sellers meet. It was the first compilation of note
investors and remains the largest and most accurate
listing of TRUE end-investors.
Over 10,000 copies are in circulation. It is also on the
Internet and features direct links to investors' e-mails and
websites for on-line submission of notes.
If your firm buys notes with your own sources of funds unavailable
to note brokers OR offers a product or service to the industry,
you should be in the Registry. If your firm is already in the
Registry you may need to renew for 2009. Go to:
www.PaperSourceOnline.com/reg-form.html for an application. THE
DEADLINE IS FEBRUARY 28.
*******************************************************************
FUNDS NEEDED -- COLLATERALIZED
Amount Requested: $25,000 - $30,000
Terms: One year
Collateral: 2 deeded luxury condo parking spaces in downtown
Chicago. Value $60,000. Monthly assessments: $112.00. Property
Taxes: $1000/year. Income: $325/month
The above figures are for both parking spaces.
I would plan on continuing to pay the assessments and property
taxes and collecting the monthly rents, unless a lender would
prefer a different arrangement.
I have a good credit rating.
Contact John Miller
(312) 946-0772
e-mail: john@johnpmiller.com
*******************************************************************
FROM THE JANUARY, 2009 PAPER SOURCE JOURNAL EDITOR'S COLUMN
By W. J. Mencarow, www.PaperSourceOnline.com/subscribe.html
WHY THE FUTURE IS BRIGHT FOR NOTE BROKERS & INVESTORS
For years, anybody who could fog up a mirror could get a mortgage.
Home sellers didn't need to offer financing. As a result, the
supply of good notes secured by single family homes dried up.
That's why I've long advised people looking for existing notes to
forget houses and focus on other types such as commercial and
business notes.
We have turned the corner. Home sales have plummeted in
most parts of the country, and sellers are starting to take
back financing, creating notes. But always remember that ours
is a market that moves glacially. As Jack Reed (www.johntreed.com)
says, "Sellers are always behind the market." In a hot market
sellers set prices too low -- that's why in such a market houses
often the same day with multiple offers over asking price.
In a cold market sellers want too much and houses sit for
months or even years.
Today most sellers (and their agents) are pricing houses
too high. They think they can still catch the tail of the comet.
They are wrong -- the comet is long gone, circling Neptune by now.
That's why houses languish on the market.
But sellers will soon hear the crack of DOM --
Days On Market, the average number of days properties in
a given area are on the market until they are sold. All over the
country sellers are waking up and starting to offer incentives,
and the best incentive is seller financing. The future is
bright, indeed, for note brokers and investors.
DID SUBPRIME MORTGAGES CAUSE THE PANIC?
by W. J. Mencarow
Ask most people the cause of the threatened "financial meltdown"
and they'll likely tell you "subprime mortgages." But
a little research exposes that to be untrue. The total amount of
subprime mortgage principal outstanding is about $1.3 trillion.
If everybody with a subprime mortgage defaulted (which hasn't
come close to happening), and if the foreclosure sales produced not
one dollar over the mortgage balances (which is obviously
ridiculous), the bailout should be...now, I'm not a government
economist or congressman, so I need time to figure this out...I
think the figure is...uh...about $1.3 trillion.
But the bailouts total...well, nobody really knows.
The press keeps repeating $8.5 trillion. That's But even if true,
why do we need to spend $8.5 trillion to solve what isn't even
close to a $1.3 trillion problem?
But maybe the problem isn't limited to subprime mortgages.
Maybe it's all mortgages in default or foreclosure. Fine, let's
do the math. According to the Federal Reserve, as of August,
2008, the total value of all residential mortgages in the U.S. (not
just subprime and not just defaulted) is $10.6 trillion. As of
August, 2008, according to the Mortgage Bankers Association,
9.2% of all residential mortgages were either delinquent or in
foreclosure. $10.6 trillion x 9.2% = $975 billion. In other words,
$975 billion would pay off 100% of the balance of every single
residential mortgage in default. So why do we need to spend $8.5
trillion -- more than the cost in today's dollars of every U.S.
war from the Civil War to Iraq -- to solve what isn't even close
to a $975 billion problem?
*******************************************************************
The Cash Flow Dollar Store Has Had A Total Makeover!
www.cashflows.org
*******************************************************************
The answer is simple. It has nothing to do with
mortgages or meltdowns and everything to do with greed and
institutionalized greed, that is, good old-fashioned
theft. The recipients, global financial institutions, stole
our money. When you do the most rudimentary research you find
it is the most blatant Grand Theft in American history. The
$8.5 trillion was simply transferred from the taxpayers to
private hands. Our money was stolen by the financial
institutions with the full complicity of Bush and Congress.
To prove this one need go no further than to ask the giver and the
recipients one simple question: Where did the money go?
When asked that question by the Associated Press the thieves
replied, "We've not given any accounting of (it)...We have not
disclosed that to the public. We're declining to." (JP Morgan
Chase)... "We're not tracking it." (Regions Financial Corp. &
SunTrust Banks)..."We're choosing not to disclose that." (Bank of
New York Mellon)..."We are going to decline to comment."
(Morgan Stanley)..."We're not sharing any other details. We're
just not at this time." (Comerica, Inc.). See pages 6 and 7 of
this issue for more.
I can tell them where part of it went. As soon as they
got their hands on the bailout, Goldman Sachs gave out $10.2
billion to their executives.
Financial institutions' lobbyists conspired with members of
Congress and the Bush Administration to steal our tax money and to
make sure there was nothing in the bailout bills that
required them to account for one single penny; again, blatant theft
on a scale unprecedented in American history.
Think of it this way: $8.5 trillion would buy 80% of
all the residential mortgages outstanding in America ($10.6
trillion x 80%). Not just those in default, but 80% of every
single one. Not that I advocate this, but instead of using our
tax money to pay off Wall Street's gambling debts (which is
what the bailout is), that money could have paid off 80% of
everyone's mortgage. Would that not have been a "stimulus" for
the economy?
Not satisfied with $8.5 trillion, President Bush took another $6
billion of our tax money to give to GMAC, the lending arm of
General Motors. Cerberus Capital Management, a private-equity firm
that also owns Chrysler -- which is getting a separate $4 billion --
owns 51% of GMAC. That's a total of $10 billion (that we know of)
to companies controlled by Cerberus. I couldn't find a single
news story that mentioned that former Bush Treasury Secretary John
Snow is the FRIGGIN' CHAIRMAN OF CERBERUS CAPITAL MANAGEMENT!
Let's review: The former chairman of Goldman Sachs was
Bush's Treasury Secretary, Henry Paulson. Bush signs off on a
$12 billion taxpayer handout to Goldman Sachs (which immediately
gives $10.2 billion to their executives as bonuses [London Daily
Mail, 12/30/08]). The current chairman of Cerberus (now also
effectively chairman of GMAC) is John Snow, Paulson's predecessor
as Bush's Treasury Secretary. GMAC gets a $6 billion taxpayer
handout. Snow's company also owns Chrysler and gets another $4
billion tax payoff.
It pays big to be friends with George W. Bush. Now, it's
too early to track stuff like this in the Obama Administration.
Surely he would never channel our money to his friends. Surely
he would never, for example, appoint someone to be, say,
Secretary of the Treasury -- among whose other responsibilities
is to oversee the IRS -- who failed to pay his taxes for years,
even though he was informed at least four times a year of how much
to pay and only paid them after he knew he was being nominated,
and cut a deal so he wouldn't have to pay back interest and
penalties like you and I would if we did that? Nah...
*******************************************************************
FINDING NOTES AT THE DENTIST'S OFFICE!
by Delbert Ashby
Recently I had the misfortune of visiting my dentist's office. He
is a very aggressive marketer of his business, with several
branches and more than 15 dentists in the branch I visit.
On the wall of his lobby is a sign which says, "Bright smiles
are always in style. Talk to us about braces for the
entire family. Financing available...$59 per month for children
and $69 per month for adults. No down payment."
Notice that he does not mention the interest rate or the number
of months that the financing would last.
The receptionist at my previous dentist's office said
that her ten-year-old is about to go into that kind of program.
After her dental insurance coverage and after a courtesy
professional discount, it is going to cost her $3,600 out of
pocket...for one child.
While I intuitively wouldn't want that set of braces as
collateral, maybe there is a way to get the dentist to guarantee
the loan or maybe there is some other way to secure it. Is it UCC
paper, a straight personal loan, or what?
With people saying they can't find notes, maybe a look at
financing all kinds of other things could become a new market.
Remember, there is that segment of the population that
doesn't ask what it costs, just "how much down and how much a
month?"
Let's look at the possibilities on the calculator where the
dentist sets the interest rate at 12% and the payments at $119.57
per month.
Line one shows the original loan conditions. Line 2
shows the result for us if we purchase the note at a 20% discount
from face, or $2,880.
As an alternative, suppose we were to buy enough to
pay his costs in the job (salaries, rent, supplies, etc.),
say 40% of the note, then line 3 shows our cost and yield.
PV in line four shows the balance of the note when it reverts
to him after our payments have been collected.
N I PMT PV FV
36 12 ? 3600 0
36 ? 119.57 2880 0
15 ? 119.57 1440 0
21 12 119.57 ? 0
You can see that in the total purchase case you get a
return of over 28% and on the partial purchase you get over 34%.
He will have a loan balance on over $2250 still left after you have
collected your 40% (15) of the payments. Such a deal might be
salable with a small practice which wanted to offer financing
and needed the cash now to handle the other expenses.
As always, be sure to determine which law the financing
is covered by, how you would "foreclose," and evaluate it as a
business opportunity with proper due diligence.
Delbert Ashby is a highly respected note investor, broker
and teacher with decades of experience. He is a recognized expert
doing the very things he writes about. He has taught
hundreds of others to do the same and does business with them
regularly. He is the author of "Make Money Trading Mortgages"
an indispensable guide for note brokers (and those who
want to be). You can download his book for only $19.95 at
www.PaperSourceOnline.com/mmtinfo.htm
If you liked this article, you should subscribe to THE PAPER SOURCE
JOURNAL. It has lots of articles every month with tips, tricks
and techniques for note brokers and investors. Visit
www.PaperSourceOnline.com/subscribe.html