Note Professor Newsletter

Tales of "Tails" - Continued

Another example is you can split the payments you receive; for instance, you have $100K note, and are offered $50K now for half and $50K in the future for the 2nd half. (Sounds like getting 100% for your note, doesn't it? DO NOT BE FOOLED) This will be a topic for the next issue.

"Tails" or tail ends of notes has to do with the remaining payments when a note buyer has purchased a part (partial) of the note. For example, you have $100K note with 360 payments. Often times arranging for the buyer to purchase the first 120 months of payments, at which time the note would revert to the sellers, satisfies both parties.

This situation often occurs when the seller needs only $20K, and does not want to sell the entire note at a huge discount. The seller gets his $20, without ahuge discount, and the note buyer will get his yield and security. Win/Win.

Another example is when a rehabber is being eaten up with hard money interest, and needs to sell his property quickly. But alas, because of the substandard credit scores, his buyers cannot get credit. The low credit scores also means a hefty discount. Often times the rehabber can sell his property using owner financing. He can then sell a partial of the note for enough to pay off his hard money lender and closing costs. His profit will be the tail end of the note. Not as good as up front money mind you, but better than having to flush $30+ a day down the toilet in hard money interest. I call it the Rehabber Bail Out.

In the article HAPPY TAILS TO YOU, I show how it is possible to buy an entire note, and sell off the first half of the note for enough to purchase the entire note. You virtually get future income FOR FREE. This is an excellent program for your self directed IRA.

"Can't be done", I am hearing people say. Yes, it can. It IS being done frequently by those who know this powerful technique. HAPPY TAILS TO YOU teaches you how to recognize such opportunities. If you are not using notes in your IRA, you should strongly consider them.

The articles "Partial To Partials" and "For the Greedy Only" explains in simple, easy to understand language the concepts of buying partials and tails.

Next month THE PROFESSOR will delve into the ethics of partials and the myth that there is no discount when you sell your note on a partial. Does this mean selling a partial is a bad idea? Heavens no. I love them. Partials fit great in a portfolio. I just know there is a discount.

Be sure to check with competent legal and tax advisors when dealing in notes. You do have an attorney and accountant, don't you?

NOTE: Tom Henderson, aka, THE NOTE PROFESSOR™ will be speaking at the Tulsa, Oklahoma Real Estate Investment Association, on July 1st. There will be a one day workshop the follow week on July 10th. Contact: Jason Windholz for details.
http://www.tulsareia.com

Be sure to contact THE PROFESSOR with questions or comments. This is where I get my topics.

As usual, contact a CPA and attorney before dealing in notes.