Partials are becoming more and more the vehicle by which note sellers can get lump sum cash, while at the same time giving NOTE BUYERS the security they need in this chaotic economic environment.

A case in point was a note seller who had a blanket mortgage on 5 duplexes totaling over $600,000, and came to me wanting to sell the note. In looking over the package, I discovered the buyer of duplexes put less than 5% down. In other words, the duplex buyer had very little "skin in the game". In today's market condition, the NOTE BUYER did not want to take on the exposure of purchasing this large amount, especially with the duplex buyer putting very little down. Normally, very little down translates into high risk and therefore, a high discount, at best.

Add to this, the real estate sale was a "kitchen table" closing, with nothing recorded. To complicate matters further, the note had been modified with incorrect balances, as well as the note was transferred from one entity to another, again with nothing recorded. There was also an underlying blanket mortgage on the duplexes. So in essence, the note seller had a "blanket wrap". This balance would have to be paid off. This deal was "all tied up in knots", and not marketable in its present condition. Most NOTE BUYERS would just automatically pass on this because it would be complicated.

I decided to investigate further. I found out the buyer of the duplexes had excellent credit, as well as the value of the duplexes was satisfactory. How do I purchase this note to get the note seller a lump sum cash, and give a NOTE BUYER security needed to purchase a cash flow.

The solution was offering to purchase 6 years' of payments. This solution would not only pay off the underlying lien, but also give the note seller a nice lump sum of cash. By purchasing 6 years' of paymentsl, there was ONLY approx a 12% discount. GREAT!!!. At the end of six years the note reverts to the seller, with a balance of almost 90% of the original balance, with one tremendous improvement: THERE WILL BE NO UNDERLYING LIEN PAYMENTS TO MAKE. This means the note seller would be able to keep all the payments of the note.

Or perhaps the note seller might want to sell another 6 years of payments. Not bad, huh? Remember, there is no underlying note to payoff, so the cash the note seller will receive will be substantially greater, not to mention that the process would take very little time.

The seller agreed to the offer, and because of knowledge, expertise, and patience, we were able to "untie" all the knots to make the note marketable. The end result was the NOTE BUYER got a good note, along with good security. More importantly, the note seller paid off an underlying lien, (which made the bank a happy camper), and also received a nice lump sum of cash.

The moral to this story is two fold:

1.If you are selling notes, do not overlook partials as a solution.
2. If you have the know how, most "unmarketable notes" can be made marketable.

In today's chaotic market, deals like this are becoming more of the norm. If you have notes to sell, remember that partials are a viable and profitable option.

If you have questions on notes or yields Contact Me
I will be happy to discuss your specifics.

Copyright © H&P Capital Investments LLC
All rights reserved

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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

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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.

Hardly a day goes by that I do not receive an email asking about the economy. I am flattered many of you have confidence in me, but please understand if I do not answer everyone. My forum for answering economic questions is this newsletter.

Remember that economics is not a science of prediction, but rather a science of observation of how humans react to allocating scarce resources to unlimited needs and wants. With that being said, there are certain economic absolutes such as the law of supply, the law of demand, and the law of marginal utility that can be applied to give us insight as to how humans will react to market forces. Remember also that a price system is the mechanism by which markets (you and me) react to changes. Prices are nothing more than a language telling us what the markets wants, and therefore what is to be produced.

When politicians interfere in the market place, this distorts the price system, which in turn leads to bad investments. For example, in 2001 the Federal Reserve interfered in the market place by setting interest rates artificially low, then combined with Fannie Mae (a government organization) purchasing liar loans, distorted the price system, and gave a false signal that real estate was worth more than what was reality. This led to a bubble in real estate, and the economy as a whole, and hence the situation we are currently experiencing .

Congress, both Republicans and Democrats, is trying to "fix" the economy with all sorts of programs that will continue to distort the price system even further. Because the market will depend on political forces and not economic forces, predicting exactly what lies ahead is difficult. However, none of it is good.

Here are some facts that have to be faced when making investment decisions. Because of government spending, which is taking resources from productive activities and transferring it to non productive activities, the economy is going to continue to deteriorate. Add to this the Federal Reserve's printing money to pay for the "stimulus" programs, there are two forces in play. One will create a deflationary recession, the other an inflationary recession.

In this article I am going to deal only with the inflationary recession scenario. What this means is prices are going to rise (including real estate) along with a stagnating economy. However, there will not be financing available to purchase real estate, as we experienced in the 80's. Gone are the days when you can obtain financing from a bank for an investment property for 5% or less down.

From a real estate investment stand point, there are two ways to deal with this scenario.
1. Pay all cash at extremely discounted prices.
2. Buy only from distressed sellers who have free and clear property utilizing owner financing.

With properly structured owner financing, you can accumulate property with extremely advantageous terms, and you can also structure your exit strategy to not only survive, but profit. While others are losing money or sitting on the sidelines you will be accumulating wealth and cash flow. There are several owner financing techniques that can be applied to SFRs, as well as apartments and commercial properties. Knowing how to use owner financing and notes for both purchasing and exiting real estate is "must know" tool in today's economy.

The point is as long as politicians try to "fix", meaning control, the market place, good things are not going to happen. As a real estate investor, you need to change your strategy and try to cover all bases. Owner financing was a tool used in the inflationary recession we experienced in the 70s and 80s. Those who are serious about real estate investments would be wise to learn owner financing techniques.

If you have questions or comments (HINT: if you have good Notes you might want to convert them to CASH NOW for future profitable investments), please contact me.

Copyright © H&P Capital Investments LLC
All rights reserved