I have been asked many times what is the "Note Business" and how can it be of benefit to me? I guess I will start by describing how I got involved and what benefits I have realized over the years. I have always been fond of the idea of people owing me money...whether it was a boss at a J O B or tenants in a rental, clients in my business etc. the thought of my boss owing me for a weeks worth of work plus overtime, plus side jobs plus this plus that etc. made me feel comfortable having an accounts receivable tab running. Then I hear about buying "Debt" at a discount...well what kind of discount 10%? 20? 30? I started buying debt at a 40% discount and this built up my "Accounts Receivable" list substantially and now people owe me money all over the country! I say this next part with a smile on my face...some of these people that owe me are paying me back, some others are not paying me back. With that said, I own notes that I am happy sitting on and waiting for several reasons, the borrowers situation might improve over the next few months, the property might sell which I then am able to negotiate my mortgage settlement payment (short sale situation good thing as I am the bank). The value of the home may actually go up in the future (I dont buy notes for this reason).
<more on notes going forward>
Happy Investing!
Mike
Replies
Simple math time...30 notes that pay you an average of $275 per month will give you 99k per year Passive Income, you wont have to fix one toilet!
Typical example of an easy purchase of a note for cash flow. This is a deal I have for sale as we speak...
Prop located Urbana OH
Estimated Value 93K
1st lien balance 80k -status- current
2nd lien balance to purchase 48k -status- consecutive payments $375 per month since Feb 2011
Annual cash income $4,500
Equity above the 1st mortgage 13k
Interest 8%
Total payout over next 300 months $111,141
Note purchase price 26,400
return of purchase money 6 years
This is a typical deal where there is only a small percentage of our note being covered with equity. There may be some wiggle room on the purchase price because of this issue but in my opinion this is by no means a show stopper!
Let me know your thoughts....
Cheers!
Paula
Give me a call...
Paula Steele said:
Hi again Mike. Where are my notes? I have many buyers.
Yes that is correct, and these are in 2nd position with the first position current with their payments. These notes are protected with 250k of equity so yes these are sweet notes.
Alberto Artasanchez said:
So if I am reading your post right, your purchase price was 36K x 5 = 180K to get a 420K UPB. Sounds like you got a pretty good deal. Are these 1st or 2nd position notes?
I have an opportunity to purchase 7 loans with an unpaid principal balance of 420k. This does not include the interest I will collect going forward. I will get all of my purchase price out over the next 5 years. 36k per year coming in as passive income straight to my PO box. After the 5 year period I may sell the notes or not. These notes are collateralized with real estate. I think this is a good deal...whats your thoughts?