Most cash flow notes are only sold once.
That means one deal and one finder’s fee, unless you’re lucky enough to find a seller that owner finances again! But that all changes with a partial purchase.
Here’s how one note was bought four times in Real Deal #159!
- Property: Commercial Building used as Veterinarian’s Office
- Type: Colorado Deed of Trust and Promissory Note
- Sale Price: $500,000
- Down Payment: $25,000
- Original Balance: $475,000
- Terms: 8% interest payable in 360 payments of $3,485.38 per month
- Payments Made: 45 plus extra principal
- Remaining Balance: $429,376.98
- Remaining Term: 260 months
Partial Purchase #1 – The seller needed a lump sum of cash but didn’t want to discount the whole thing. The solution was a partial purchase for the next 29 payments.
Partial Purchase #2 – Two months later the seller wants more cash so sells an additional 31 payments.
Partial Purchase #3 – Four more months go by and the seller assigns another 36 payments.
Final Purchase #4 – About a year after the first partial purchase the seller decides to sell the final 164 remaining payments.
That’s four broker referral fees on one note in a year’s time!
Who says cash flow notes don’t generate residual income?
While this is a real transaction, it’s important to know these results aren’t typical. With a full purchase there is just a one-time fee averaging 3-7%.
However, the partial purchase provides the initial referral fee plus an opportunity to earn additional fees if the seller decides to sell the rest of the note later.
Usually that’s done in two steps – not four!
Plus, not all note buyers will purchase partials and not all note sellers want partials.
In our note broker training we suggest cash flow brokers tickle their calendar for a return call every 12 months to sellers on all partial deals. This is a great time to touch base regarding the status of their remainder interest and whether they would like to sell all or part of their remaining payments. It also helps to use a partial agreement that grants an option or first right of refusal on the future payments.
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