Many people have heard about the cash flow industry but don’t really know how the average person can profit from it. There are basically three methods for handling the fees paid to cash flow brokers or consultants, as follows:
1. Referral Fee
2. Establish Your Own Fee
3. Set Commission Fee
Pros: Very Little Paperwork/Time
Cons: Typically smaller commissions
Cash Flows: Most cash flows can be handled on a referral basis
The Referral Fee structure is the easiest, particularly if you already have a full time job or have limited extra hours in the day.
With the Referral Fee structure you simply find a deal and refer it on to a single Funder or Master Consultant that accepts referrals.
For the most part, you have no or very limited paperwork. You fill out a worksheet stating the person’s name and info about the cash flow. Once that information is sent, you are pretty much done. The funder will do all the work and if the deal closes send you a referral fee.
Establish Your Own Fee
Pros: Greater control, greater fees
Cons: More Paperwork (but not overwhelming)
Cash Flows: Mortgage Notes, Lottery Winnings, and Structured Settlements
The Establish Your Own Fee method takes a bit more work than the Referral Fee method but may double or triple your income.
With the Establish Your Own Fee method you will still fill out the worksheet but you will request quotes from several Funders to get the best “net” price. Once you have a “buy” number from a funder you simply subtract how much you would like to make and offer the seller something less.
How much less is up to you. On some deals you may only make $500, while on other deals you may make several thousand. It really depends on how much the seller needs and your negotiation skills. In the end, you are trying to find a fair price for your time and the seller.
Once the seller has agreed on a price, you will need to send the seller a contract agreeing to the terms.
Depending on the type of cash flow deal, you may need to handle and/or pay for some of the due diligence, like an appraisal or title work for a real estate note.
Set Commission Fee
Pro: Potential Residual Income, Funder Does Most of the Work
Con: Some ongoing follow up may be needed
Cash Flows Include: Factoring Receivables, Delinquent Debt, and Pre-Settlement Lawsuits
A favorite among cash flow consultants is the ability to create residual income. Some cash flows, such as Factoring, use set commissions and do not allow the consultant to determine his or her own fee.
The cash flow consultant gets a “percentage” of what the Funder makes on a monthly basis. This percentage is established in advance.
Not all Set Commission Fees are ongoing. Some insurance based or delinquent debt fees are set and not reoccurring (a one-time purchase) – but the commissions can be very attractive.
There are also ways to create ongoing income on some cash flows such as mortgage notes using methods such as the “Buy Full, Sell Partial.”
For the most part, which fee structure you use will be determined by the cash flow or the Funder. Given enough time in the industry you will realize the benefit of each of the ways to earn income!
Please refer to the Directory of Owner Financed Note Buyers and Service Providers for funders and master consultants.