Last month I discussed the different risks not only Note Buyer's must address, but all investors. Specifically, I discussed the Collateral Deterioration and Devaluation Risk, and one way a note buyer takes this risk into account when pricing a note.

Selling a "Partial" of your note is another way to reduce the Note Buyer's risk of collateral devaluation, while at the same time, giving the Note Seller a more lucrative way of getting a lump sum of cash, without taking a huge discount on their note.

For example, you sold your property and took back a $100,000 note @ 9% for 30 years. 3 months later you need some cash, and find that if you sell your entire note, you will have to accept a hefty discount. Perhaps selling a Partial of your note will solve your problem. If you were to sell 7 years of payments, you could receive around $45,000 lump sum cash NOW. At the end of 84 months the note would revert to you with a whopping balance of $93,331. .At this point you have the option of selling another 84 months for $45,000 or taking the note back and start receiving payments. If after seven years the market condition changes where property devaluation is no longer and issue, selling your entire note might be the smart thing to do.

Many investors are finding this technique to be more and more lucrative in today's market. Not only are they getting a large lump sum of cash, but they are not having to heavily discount their note. In fact, they could possibly get $90,000 CASH for their note in only 14 years. At the end of 14 years the note would still have a balance of $80,556. Is this not a more lucrative way of selling your property than just sitting back and waiting for the banks to start lending and the economy to "return to normal"?

In this example, Note Buyers will have only $45,000 at risk in a $100,000 property. This more than offsets the collateral devaluation risk, while at the same time providing the Note Seller with lump sum cash.

What happens in the case of early payoff or foreclosure? Very good question. Each Note Buyer will have different contracts and procedures, and it is too lengthy to go into in a newsletter forum. I will be teaching a series of classes on Creating Wealth Using Notes and Owner Financing-THE LEGAL WAY, starting in April. You will not want to miss this class if you are interested in buying or selling Partials.

Like it or not, conditions are not the same as they were 3 years ago. I see no indication conditions will "return to normal" in the near future. The point is, in today's market, both Note Buyers and real estate investors must adapt to the changing environment or both will wither on the vine. Selling Partials is a way for real estate investors to obtain capital to fund new deals, as well as a way for the Note Buyers to purchase notes without the concern of having to take a huge loss, should they have to foreclose, only to find the property can no longer be sold to cover the Note Buyer's investment. SELLING A PARTIAL OF YOUR NOTE CAN BE LUCRATIVE FOR BOTH YOU AND THE NOTE BUYER.


If you have questions about Partials and how they can work for you or a Note to convert to cash Contact Me
I will be happy to discuss your specifics.

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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.

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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.

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I have received several emails asking what I thought of the "Stimulus" Package. In a nutshell, it will stimulate nothing at best, and at worst will actually add to the downward spiral of a falling economy. We must first define what is meant by "government" spending. Since governments do not produce, but only consume, they can only spend what they extract from producers. In other words, they will take your money, extract their cut, then redistribute your money out to those they favor at the moment. In the politicians fantasy world , they believe if they extract money from producers and "spend" it, this has more beneficial effect than if the producers spent the money themselves. If this logic were correct, the Great Depression would not have lasted over a decade but would have been a 2-3 year mild recession.

A simplistic example is a politician taking $100 out of your pocket, then hiring somebody to do a job for $80 (the bureaucrats need $20 to transfer your money), they will opportunistically point to the $80 job as being created. What they are ignoring are the jobs lost by your not being able to spend your $100. You could have spent this $100 by eating out, going to a movie, traveling, or even investing in real estate. Is this not "creating or saving" jobs, where there is an exchange of values. These jobs have suffered and even disappeared because your $100 was consumed by gove rnment and you do not have it to spend. This is the nature of all government spending.

The best teacher of this simple economic truism was my favorite, Frederick Bastiat. He lived in mid 1800 France, and was a formable advocate of free markets, and fought the principles of socialism in a simplistic way that has not been duplicated. If you read his writings, you would think he was talking of today's events instead of mid 1800 France. In this month's issue, I am merely going to direct you to a website to read Bastiat's classic, What Is Seen and What is Not Seen. Take note on his comments on public works. This master piece can explain what is happening today, far better than I.

In another email, I was asked why it was NOT a good idea for politicians to spend our money, if we were NOT spending. In next month's issue I will address this issue. HINT: All money is spent unless it is put under a mattress.

If you have questions, Contact Me. It is from your letters and comments that I get many of my topics. .

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