Should You Work with Private Investors?

With the stock market plummeting by the minute, you may have a few friends, business associates, or relatives asking more about notes – specifically investing in them. 

There is no question investing in notes can be a very lucrative venture. If you have your own money you can receive a great yield. If you don’t have your own capital, you can “broker” the deal to a Funder for a nice referral fee or commission. Private investors however are in a category by themselves. 

First off, if you were to sell a note to a private investor (say a family member or friend), you can’t help but feel a bit more obligated that everything goes well. While it may not be a legal obligation, it can certainly stir feelings of personal responsibility.  If the payer misses some payments you will no doubt be on the phone on behalf of the note holder trying to work out a deal. Is this really what you signed up for when you thought of tapping into all that “private money?” 

If you want to continue on the path of selling to private investors, here are three quick questions to ask yourself. 

1. Can you get the same amount (or close) by selling the note to a traditional Funder? If so, sell to the professional corporate Funder versus a private investor. 

2. Is the private investor “sophisticated?” In other words, do they already invest in notes and fully realize the risk? 

3. Is anyone in the transaction a family member? Avoid family and friends. Really, what is the upside? 

With that said, there are plenty of sophisticated private investors out there that purchase notes on a regular basis. Make sure they understand the risks and all documentation goes directly in their name. 

Making Money Using “Buy Full – Sell Short”

One of the most powerful wealth building techniques in the cash flow industry is the “Buy Full – Sell Short” strategy. Capitalizing on the power of compounding interest and the time value of money, it enables note brokers to own rights to future note payments with little to no money of their own. Read more

Real Deal #151 – Residual Income With Notes!

Welcome to Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions.

Looking for residual income with notes? Does a future income stream of $1,000 per month for 10 years on just one deal sound too good to be true? Discover how the Buy Full Sell Short strategy works on this Real Deal! Read more

What is a Good ITV?

Sellers and investors often ask what ITV (Investment to Value) they should target when buying or selling a private real estate note.

You may have seen that some note investors claim they will go 85, 90, even 95 percent ITV. Frankly, I have yet to really meet them when it comes down to funding a deal in the current market.

As a refresher, the ITV represents how much is invested or paid for the note in comparison to the property value.  It is a different ratio then the buyer’s LTV (Loan to Value) or the discount percentage.

The lower an ITV the safer the investment, but you still want to stay competitive. Personally, I don’t like much over 80% ITV and prefer to be around 70% or lower depending on credit. You want some room in the event of a foreclosure or a down market (either of those sound familiar around now?).

A word of caution; don’t let a higher return push you above your ITV comfort zone. If you decide you want a 75% ITV and 10% yield then don’t be tempted with an 85% ITV and 13% yield. Someone once told me yield is irrelevant if you don’t get paid – they were right.

For more information on buying or selling notes for profit please visit the bookstore for Personal Profit Series: Notes – Your Complete Money Making System to Buying, Referring, Creating and Holding Real Estate Notes!

Is 2009 a Good Time to Buy Owner Financed Real Estate Notes?

This question is on the minds of many investors right now. With real estate values down and banks restricting credit, there are more seller-financed notes available. Although there is never a crystal ball, if you buy notes at a good ITV you have the opportunity for high yielding investments. Here are a couple things to look for… Read more

Should I Owner Finance a Second Mortgage?

More and more sellers are being asked to carry back a second mortgage for the buyer – especially with the banks still keeping a pretty tight reign on lending.

While seller financing can be a viable alternative to bank loans when it is the buyer’s primary obligation or first lien, a second lien has considerably more risk. Read more