How to Negotiate Cash Flow Notes

One of the more popular questions, after “How do I find notes?” is “How do I negotiate with a note holder?”

Since the cash flow business affords consultants the ability to determine their own fee, many new note brokers feel challenged on how to present an offer. These 5 tips should help you be that much closer to closing the deal!

1. Be Fair

Negotiating your own fee does not mean “get as much money as you can.” It means you come up with a fair amount of money to make given the amount of work it takes to sell mortgage notes. Although there is no set amount, roughly 6-8% is a good starting place.

2. Present the Seller with Options

By now you know there is more than one way to purchase a note. The talented note broker knows a multitude of ways to purchase the note (Full, Partial, etc). You should always present more than one option to your seller, even if they initially said they only were interested in a “full buyout.”.

3. Put Your Offer in Writing

Many people quote over the phone. Although this has some advantages the disadvantages are just as evident. If you are going to be giving someone a quote over the phone, be sure to follow up with a letter that indicates the various options you discussed. You would be surprised how many people throw that letter in a drawer, only to call you several months later and do the deal.

4. Know Why the Seller is Selling

This is probably the biggest and most important piece of the puzzle. You must know why they are selling. Not only is it the key to any emotional reasons for selling the note, it is paramount in determining what offers to present to them. For example if a seller wants $20,000 to buy a boat, presenting them a $15,000 partial doesn’t make sense.

5. Keep the Seller’s Interest at Heart

When presenting several offers to the seller your commission may vary offer to offer. Never try to push a seller to one specific offer just to make more money. Just help the seller find the most competitive offers and let the sellers choose what’s best for themselves; not you.

Negotiating an offer with a seller does not need to be an intimidating task. Your goal should always be to help the seller and in no way are you in an adversarial relationship. Make helping the seller your number one goal and you’ll build a winning cash flow business!

Check out the free cash flow training videos over at for more great tips!


  1. Jeffrey D. Smith says

    Would someone please answer these simple questions?

    1. What is the usual and customary “investment to value” (ITV) ratio?
    As I understand it, the ITV is the sum of all remaining senior debt
    plus the note purchase price, all divided by the property value.

    2. What is the typical yield required by note investors in the
    current market?

    3. If the note face value is within the required ITV *and* the face
    rate is within the required yield, then what is the minimum discount
    rate for a note buyer?

    4. Is a simultaneous closing available for notes secured by commercial
    property? If so, what are the differences with respect to notes secured
    by residential property?

    5. Is there a simple, straight forward formula/spreadsheet calculation
    to plug in the note parameters and the note buyer’s ITV & yield &
    minimum discount to determine the note purchase price?

    and please don’t refer me to buy your book or course. Just straight
    forward and honest answers are greatly appreciated.

    Thanks in advance.

    • Hello Jeffrey, your “simple” questions are not exactly “short” answers (hence our writing the 475-page note industry manual which, per your request, I am making sure we do not refer you to). It is kind of like me asking you to tell me how to build a car, but don’t refer me to a manual or book of instructions.

      That said, here are a couple “quick” (although incomplete) answers that should point you in the right direction.

      1. Yes, ITV is your investment plus any senior liens divided by the property value. Acceptable ITV varies by investor.

      2. Yield requirement varies a lot. What is the LTV? What is the ITV? What is the credit rating of the payor? Etc Etc. Start with 12% and figure it can go either way several basis points.

      3. Again, varies by investor. At the very minimum it will need to cover the investors hard cost of closing the deal (appraisal, title, etc) and maintain the yield requirement.

      4. Commercial property is a very different investment than residential. That said, I am not aware of an institutional funder buying simultaneous commercial deals in the current market.

      5. Yes, you can easily put the “formula” in a spreadsheet provided the *required* input numbers are consistent. However, when you do that you usually under pay (or bid) for some really good notes and over pay for others. Notes need to be evaluated on a case-by-base basis.

      There you go. This site also has over 150 FREE articles for you to read – most of your answers can be found throughout.

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