NPRO
H & P Capital Investments LLC
Issue 42
December 2008
Partials-Safety Plus Yield
by Tom Henderson
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With the economic conditions in today's market, many of my students are starting to put their education into practice and invest in buying a "partial" of a note because they are realizing buying a partial might be the safest investment that can be made.

For the Note Buyer, purchasing a partial serves three purposes:

1. Note Buyers will enjoy above average yields, or even OBSCENE YIELDS. For example, let's take a $100,000 note @ 6%, with $599.95 monthly payments for 30 years.

If the Note Buyer wanted a 12% yield, he/she would pay $26,952.82 for the right to receive the next 60 payments. Is this a good investment for the use of your money for 60 months? I think so.

2. Note Buyers will limit their risk or exposure when buying a partial. In the above example, let's go to extremes and assume the property is worth only $100,000. With $26,952.82 invested in the note, in the event of default, the Note Buyer should have little difficulty in recouping all money owed him/her. Again going to extremes, is it not a safe bet that after foreclosure, the house can be sold for $26,962.82 plus the cost of foreclosure? Can you think of a safer investment

3. Note Buyers can buy partials with small amounts of money. No matter what amount you consider "small", buying partials can be utilized. Again, in the above example, the Note Buyer will enjoy a 12% yield with only approximately $27,000 invested. Not bad.

A combination of all three of these advantages can also be applied to buying partials. In THE NOTE PROFESSOR NOTEBOOK, there are several partial techniques where you can enjoy yields from 35% to having no money in the note purchase, which makes your yield OBSCENE. You will be amazed at the simplicity.

There are also advantages to the note seller.

1. The note seller will not have to take a deep discount because of low interest rate, low credit of the payors, or questionable property value. In the above example, if this note were to be sold to give the Note Buyer a 9% yield, the note would be discounted to $74,513.26. This is a hefty discount. By selling five years of payments, the discount is only $4,059.27. ( Be aware than many note buyers will go to lengths to hide the discount of a partial, and it can be substantial. Knowing the different "tricks" can save you a lot of money.)

2. The note seller will receive a lump sum of cash NOW, while having the note revert back to the note seller with a high remaining balance. Again, using the above example, the note seller would receive $26,952.82 immediately. (If the note seller needs more money, he/she can merely sell more payments) At the end of 60 months, the note would have a whopping balance of $93,054. The note seller will then have the option of selling another portion of his/her note if more cash is needed. (I know one investor that uses this technique on a regular basis) This gives the note seller the best of both worlds.

The question always arises of what happens in the case of default and early payoffs.
There are several ways to deal with these events, but they are too lengthy and requires a lot number crunching and preparing amortization schedules. A newsletter is not the proper forum to discuss defaults and early payoffs. Just be aware that like all contracts, there are contracts that are completely in the Note Buyer's favor. Knowledge of the different contracts can save you a bundle. I will be going into detail on how to address these and other issues in my workshop on Saturday, January 24th. I will provide sample contracts, as well as other Do's and Don'ts of Buying and Selling Notes.

Remember, buying or selling a "partial" of your note can solve many problems in today's economic environment. For the Note Buyer, it provides a relatively safe investment with high yields. For the Note Seller, partials will provide the lump sum of cash the Note Seller needs without the huge discount of selling the entire note. Because the note reverts to the Note Seller with a high remaining balance, more and more investors are utilizing this technique as an exit strategy.

If you are selling your property using owner financing, please contact me. I will help you structure your note to give it maximum value in today's market.

If you have a question on your note or a Note to convert to cash, contact me
I will be happy to discuss your specifics.

Copyright H&P Capital Investments LLC
All rights reserved

Note Professor NoteBook
by Tom Henderson
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If you have not attended a Note Professor "How To Get Rich with Notes" class, be sure and purchase the Note Professor Note Book manual to enhance your knowledge of creative real estate financing and note buying and selling.

"I got your news letter. It was great, purchased your (Notebook) and it was awesome. I used your renter technique and it worked also. I am getting 41% return thanks to your expert advice. I have spent hundreds and not able to do any thing thru other gurus" Gary W. Garland, TX

"It blew me away what a powerful tool notes can be. Lots of great information, worth every penny! Highly recommended."
Jeff C. The Colony/Investor

"Your manual is short and straight to the point, it's rare to buy something today that gives you your money's worth. Thank you" Stephan B. Phoenix, AZ

GUARANTEE! You will learn at least one new usable concept to increase your profit in buying or selling notes and real estate.

By popular demand, THE NOTE PROFESSOR NOTEBOOK is now available in easy, downloadable E- book form for a the low, affordable price of $39.95. Other products are also available, including HOW TO MAKE OBSCENE PROFITS with SMALL MONEY, and GUIDE FOR SECOND LIENS. There is also a FREE download of CHECK LIST FOR OWNER FINANCING. Simply go to the NOTE BUYERS STORE. I can think of nowhere that you can find such information packed products at such incredibly low prices. We are still working out the bugs, so if you have any problems, be sure to contact me.

Tom Teaches: January 2009
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"Seller Financing Secrets for Building Wealth" January 24th Saturday in Dallas Texas.

In coordination with the Roddy Organization, Tom will again be teaching a workshop on Secrets of Owner Financing and Notes.

Tom will go into detail on the number crunching, avoiding traps, as well as provide you with samples forms, contracts, and check lists necessary when owner financing or selling a note.

Former students can attend this more advanced and detailed workshop for half the ordinary price. (Limit to 3 former students per class) Simply call Beth at Roddy.com for special pricing. (214.593.0074)

I do limit my class size to 20. Be sure to sign up early to be assured a seat. See you in class!!!

This will be an all day event on Saturday, January 24th from 8:30 to 5:30 We are in the process of determining a location in the Dallas area. For details click here

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Tom's ECONOMIC OBSERVATION
by Tom Henderson
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Definition: Supply

The total amount of goods or services offered by potential sellers for sale at a particular time and at a given price.

Just as in the definition of "demand", (See last month's issue of THE NOTE PROFESSOR NEWSLETTER) the term "supply" has a correlation with price.

Remember, price is nothing more than exchanging one good or service for another. The point being that something must be produced to exchange. Relative to today's events, apply this definition to the "supply" of money. Politicians have the false belief if the "supply" of money is increased, then demand will also increase. They err on three fronts.

First they try to equate the printing of currency as the equivalent of producing a good or service. Printing a dollar bill does not produce a good or service. It merely devalues the dollar. This is the true definition of inflation. Trying to solve the economic chaos, which was caused by government, by printing currency and pretending it is production is merely setting the stage for inflation to go into fast forward at some point in the future.

Second, politicians believe if money is taken from the productive ventures and redistributed to non productive ventures, by some miraculous event, this is going to create jobs and solve all our economic woes. To use a real estate analogy, it would like taking all the income from your profitable rentals, and transferring the income to a large non profitable commercial venture.

Thirdly, the Federal Reserve and politicians do not have an understanding the function of prices in an economic system. Prices are a language that tells us what to produce, how much to produce, what to buy, when to spend, when to save etc. All of these variables are incorporated into a price system. Artificially setting the price of a commodity, and money is a commodity, the price system is distorted, which results in shortages of some sort.

Applying this concept to the supply of money, the Federal Reserve has arbitrarily set the "price" of money to banks approximating 0. They are going under the false premise that if they lower the price of money, and increase the supply of currency, demand will increase, and everyone will immediately start buying cars and houses.

The only problem is the "price" and "supply" of money is being set by politicians and bureaucrats, not the potential sellers. As a result, we have a situation that is not supposed to exist: low interest rates and tight money. Add to this the fact that 3 month Treasuries were paying a negative interest, and it is plain the effects of the distortion of a bureaucrat arbitrarily setting the price and supply of money has on the market. Something has to give somewhere. What will happen? We shall see.

(As a side "note", pardon the pun, these conditions are making purchasing notes, especially partials, a prime investment because of safety and high yields)

If you have questions, Contact Me. I will address them in future issues.


Copyright H&P Capital Investments LLC
All rights reserved

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Tom Henderson
H&P Capital Investments LLC