- Note Course Bonus: Take The Money And Run?
Published: Wed, 02/08/12
A Paper Source E-Course Bonus
"What a business! What fun, using creativity and knowledge to
solve customers' problems in ways that really benefit them, and, at
the same time creating investments for ourselves requiring little
or none of our own capital. It's great being in a business that
affords so many opportunities, such as banking $16,835 now or
"letting it ride," creating a future annuity of 147 payments of
$1,603.05 a month." -- Kevin Clancy
Hi ,
In this issue Kevin Clancy, President of American Funding
Group, tells us exactly how he did the above.
Kevin uses a lot of calculations in his article -- made easy
with TValue Amortization Software. I've used it for years
to quote notes no matter how difficult they seem to be.
You can even use it to FIND NOTES by offering note holders
free amortization schedules!
See the info after Kevin's article and go to
http://store.papersourceonline.com/tvalue/
At checkout, enter the code PSDISCOUNT and save $22.00.
You won't find a better price anywhere.
Cheers,
Bill
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W. J. Mencarow
President, The Paper Source, Inc.
www.PaperSourceOnline.com
www.cashflows.org
TAKE THE MONEY AND RUN...OR LET IT RIDE?
by Kevin Clancy, President
American Funding Group, www.buymortgage.com
Ask anyone who has been in the note business for several years,
"How do you become wealthy in this business?" and they will answer,
that one, you don't do it overnight, and that two, you do it by
becoming an investor yourself.
A real advantage of this business is that we can use our knowledge
of the product to develop net worth. And as we develop expert
knowledge we will see investment opportunities in deals that few
others will see.
At American Funding Group, we look at every deal to see how we can
carve out an equity position, which will grow over time. A
straightforward way to do this is to buy a full mortgage and sell a
partial to an investor. The note broker keeps a number of payments
on the back end of that mortgage. After the investor receives his
contracted number of payments, the note broker receives the rest.
Or, if the note pays off early, the note broker will receive the
present value of the cash flow that he/she kept on the back end of
the mortgage. That investment strategy doesn't require the note
broker to put up any funds...it's a way to invest with no starting
capital.
Let's look at a deal and analyze the option of buying a full
mortgage and selling a partial mortgage compared to taking a one
time fee by selling the full mortgage. Should we "take the money
and run... or let it ride?" Follow this transaction as it unwinds
and see how early rejection led to a nice profit opportunity.
In the transaction, our noteseller was taking back a note in the
sale of his SFR, which would be owner occupied. The seller
approached us before the real estate closing. He had authorization
to pull the buyers credit. It was excellent.
The house was selling for $250,000 with $25,000 down. The $225,000
first mortgage was amortized over 360 months. The first 18 months
were to be at 8% interest, then a $25,000 principal payment was due
and the interest rate changed to 9%. If you work out the income
stream you'll see that there were to be 17 payments of $1650; the
18th payment was to be $26,650 ($25,000 + $1650); then 342 payments
of $1603.05.
The negotiations on the prospective note purchase went on for about
a month. The seller was a small custom home builder who didn't need
to sell, but could use cash to complete a number of building
projects at the same time, instead of just one. We made offers
based on our standard yield for new notes.
But the note seller was a good negotiator and pushed hard. And, he
wouldn't accept our offers resulting from 10-11% yields. But that
apparent problem, led to a discussion of his real needs. He said he
needed $50,000 to build a house on property that he owned, but he
could use $100,000. We then worked out partial purchase options.
He didn't accept either of the two partial purchase options that we
worked out based on 10-11% yields, because in his words "the cost
was too high". But the rejection of our offers led to his statement
that he would be willing to sell the whole note if he could get
$200,000 (a "discount" of 11% from the principal of $225,000). We
told him that if we could come close we'd get back to him.
READ THE REST OF THIS ARTICLE TO SEE HOW KEVIN MADE THIS
DEAL WORK: http://bit.ly/AwJN09
**********************************************************
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