Moneymaking Opportunities with Notes!
August 18, 2008 by Tracy Z · Leave a Comment
Whether a seller, investor, or note broker, there are many opportunities to make money with owner financed or seller carry back notes. There is a lucrative secondary market for seller financed notes also known as the paper business. Here are a few of the most common ways people make money in the note business.
Maximize Selling Profits
A seller often takes back financing for a buyer to appeal to a larger group of buyers and maximize the sale price. A property seller may also elect to take back a portion of the sale price for long term interest income. Why should the banks make all the money?
Did you realize that a bank earns back almost 2.5 times the loan amount on an average $100,000 loan at 7.5% that runs for a full term of 30 years? The payment would be $699.21 based on a 360 month amortization which means the buyer will pay back over $251,715.60 after 30 years on the $100,000 loan. All due to the power of interest!
Referral Fees
A note broker or note consultant earns a referral fee by acting as a financial middleman between a note seller and a note investor. A note broker markets to note holders offering to help them liquidate their note payments for cash today. The note broker then connects the note seller with a note investor, earning a fee at closing. This fee can range from hundreds to several thousands of dollars depending on the size of the note and their relationship with the investor.
Interest Income
Investors purchase notes for the interest income. First an investor can earn the interest rate or face rate charged on the note. An investor can further increase their return by buying the note at a discount. For example if a note has a balance of $25,000 at 8% interest the investor can offer less than $25,000 to purchase the note for a return of 10% or more. The greater the discount the more the return is increased!
Rather than holding for long term interest income, an investor might also purchase a note at a discount and then resell at a later date for a profit. This is often accomplished by combining several notes together in a group or portfolio selling at a higher price to a larger bulk investor.
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