Automatic Equity and Automatic Profit
You know you make your profits in real estate
you buy, not when you sell. Buying notes at a
gives you another opportunity to obtain properties at a
discount. In THE NOTE PROFESSOR
discussed how to buy notes and then trade them
face value on real estate to get sort of "automatic
equity" in property.
In this issue, I am going to give you
another technique you can use to
obtain "automatic equity". In today's
record breaking foreclosures, this technique is a
powerful way of obtaining real estate.
Let's say you purchased a $100,000 note for $80,000
that will yield you 9.5%. When you contact the payors
(property owners), instead of introducing yourself as
the big, bad note holder, why not be a little more
amicable, and set the stage to purchase the property
in the future.
You might even get the payors to grant you a "first right
of refusal" option. For those who are unaware of this
type of option, if the payors (property owners) gets an
offer to sell their property, you will have the option to
match that offer. If you do not like the price, you just
pass. Even if the payors do not give you the option, you
established a relationship with them where they
will contact you if they get into financial trouble
and need to get out of the property.
Here is a good example. The property that secured the
$100,000 note you purchased for $80,000 is worth "as
is" $120,000. The payors (property owners) NEED to
sell the property, but in today's market there are few
buyers. The property owners then come to you.
Hmmm, what can you do?
Can you see the opportunities this situation offers?
Why not give them $5,000
money and take the house. You now have a $120,000
FREE AND CLEAR house that you have only
invested ($80,000 for the note + $5,000 to the payors).
PRESTO! You now have automatic equity.
Now you can either refinance and put around
in your pocket, then rent it out for a cash flow.
Or maybe you would prefer to have a free and clear
house in your portfolio, and just rent it out for a large
positive cash flow. This is going to jump
your yield to astronomical levels. Depending on
different variables, such as how much you charge for
rent, or if you sell the property for all cash in the future,
your IRR would be somewhere between 25% and
While the creative ideas are flowing, why not sell
using owner financing. Do you think you would
any takers with 5% down, and carrying a note for
$114,000. Now you have $114,000 note that you have
only $80,000 invested. Depending on the terms and
interest rate, this will increase your yield to double
digits. (Play with this for a little calculator practice)
possibility, might be
to GIVE THE PAYORS ALL THEIR EQUITY
valued at $120,000-note of $100,000) in
the form of a note. In other words, give them a $20,000
note secured against the property or another
property.This puts you in a perfect position to obtain a
built in discounton your $20,000 note. You
then have just increased
your automatic equity. Sounds good to me!
happen to your note? Good question. There are
several possibilities, all of which are in your favor, but
we do not have time to discuss them in this issue.
going to stop here, because those who have taken my
classes, or have purchased THE NOTE
NOTEBOOK, know I teach concepts, not
techniques. Are you beginning to see why buying
notes at a discount can be best of all situations? You
get either above average yield, automatic equity, or
All of the above techniques and concepts need to be
and/or attorney. I think you are going to like all their
If you want to purchase a note or have a note you want
to convert to cash, contact
me for professional pricing.
Copyright © H&P Capital Investments LLC
All rights reserved
If you would like Tom Henderson to speak on real
estate investing and owner financing with
your real estate office or investment group. Contact
Note Professor Notebook
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.
Real Estate and Note Investing Education
"I got your news letter. It was great, purchased
(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"
W. Garland, TX
"It blew me away what a powerful tool notes can
be. Lots of great information, worth every penny! Highly
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,
You will learn at least one new usable concept to
increase your profit in buying or selling notes and
Definition: Rule of 72
Formula for approximating the time it would
take for a given
amount of money to double in value at a given
interest. The formula is 72 divided by the interest rate.
Example: $100 at 12% compound interest. Divide 72
equals 6. (If you want some calculator practice, try
down the five variables and see what you come up
with. I came
up with 5.81 years)