Note Business Tip of the Month 

January 2010

 

For all new subscribers, Welcome! If you have missed any of Armstrong Capital's E-letters just click here to read our Archived Monthly Email Newsletters!

This year we have added a Question of the month to this regularly scheduled "Tip of The Month" e-letter. If you have a question you would like to see answered in this newsletter just email Jeff!

 

*Tip of the Month: 

       Did you know....

           Seventy percent of your time as a Note Broker and Note Investor is spent on marketing?
         

*Quote of the Month:

         Stop wishing for what you want and start working for what you want. 

                                                                                        - Unknown

*Question of the Month:

 

Q -   Hi Jeff....  

I haven't dealt with privately held notes in quite some time. Can someone update me on the basic parameters given today's climate:
 

1)How many months seasoning required?
2)How much equity required? Last I dealt with this, 20% required, with the seller having to take back a 2nd note for 10%.

Anything else I should consider before collecting all the data? No sense in collecting data if the seller will be unwilling to carry the note for "x" months, whatever the criteria may be. If it looks like he will be okay with the basics, then we can go ahead and structure a sale so it benefits all parties involved and is attractive to note buyers.  - Richard A.

 

A - Hello!

Happy New Year! Thanks for the questions. First, know that there is a note buyer for just about any first position note secured by any type of real estate, the question is, will the seller accept the discount. We can buy a note with as little as one month of seasoning with no equity if that is what the seller has. But again, will they accept the discount or the terms of our offers (full, partial, split, etc.)?

With that said I can give you suggestions for what a good note is on a residential property. On residential property we would `like to see':

10% CASH down payment
Amortized for 30 years
Balloon in 7 years
9% interest rate or higher
650+ credit score of the payor
1 months of seasoning

How often do we see what we `like to see', rarely. So again, this would be the ideal note just keep in mind that even if the note does not have these terms we will still consider buying all or part of it. Hope this helps!  - Jeff
 

*Calculator Problem of the Month:

At the request of many of the subscribers to my monthly email newsletters and tips we will now have a calculator problem every single month for you to solve, using the simplest calculator for the note business the HP 10BII.

 

Last month we calculated out an interest only note with a balloon payment in 7 years.  This month let's calculate out the same $250,000 note but it will be a fully amortized note with a balloon payment in 7 years. This way you will be able to compare the differences.

 

Note terms - $250,000 note, amortized for 30 years at 6% interest with monthly payments and a balloon in 7 years. Verify the payment amount of the note and verify the balloon amount of the note:

 

1) With a balloon payment there is an extra step. First step verify the payment amount. This is what we know

 

    N   = 360

    I/YR = 6

    PV  = -250,000.00

    PMT = ???

    FV  =  0 (initially we need to calculate the payment based on the full amortization period of the note - in this case 30 years, even though we now there is a balloon payment in 7 years)

 

        N     I/YR     PV      PMT     FV

     360     6   -250,000   1,498.88   0

 

When we have four of the five buckets filled in we can always calculate for the fifth empty bucket and you should have gotten $1,498.88 as the payment amount.

 

2) Next, now that we have amortized the note and verified the payment we now need to verify the balloon amount in 7 years. Once we have the 5 buckets filled all we do is change one number to get another number.  In this case we will change the "N" to the balloon term of 7 years and solve for "FV" which will give us the amount due after 7 years, otherwise known as the balloon payment. Enter in the known information as shown above and solve for "FV" the future value of the note (push the "FV" button):

 

       N    I/YR     PV      PMT      FV

     84     6   -250,000  1,498.88   224,098.46

 

You should have gotten...   $224,098.46 as the balloon amount

 

Did you get it? The future value amount (balloon payment) on this note is $224,098.46 and at the end of the 7 years the payor must somehow come up with the $224,098.46 and pay the note off (refinance, sell the property, etc). Another way to explain it is that the buyer will make 84 payments of $1,498.99 and one final payment of $224,098.46. Great job! More to come next month!

 

*Highlight of the Month:

 

2010 New Year's Special! - We received tremendous response to the year end "Rainbow Package Special" yet may of you requested to get the special in E-book format and did not want the hard copies. So this month, as an aide to help you develop your note brokering skills I am extending my offer to you of my complete "Rainbow Package" of E-books for the very reduced price of $88!  That's over 30% off if you purchased the E-books regularly.  You will receive the E-book versions of Scripts and Tips, Every Single Profitable Note Marketing Idea In the World (along with the Note Holders Handbook), Personal Cash Flow Prosperity and of course the Glossary of Real Estate Note Terms. But that's not all, in addition, if you order through this email I will also send you for FREE (in the mail) the Secrets of Paper 101 four disk audio set (regularly $99) with over 6.5 hours of straight-forward, honest beginning note business basics, again for FREE (you just have to be sure to include your address when you purchase the e-books).  It includes the good, the bad and the ugly in addition to the myths of today's note business.  These are must have products in your note business library. This offer will expire Sunday February 14th, Valentine's Day.  So get yourself or your sweetheart a sweet deal on my e-books today! To order your "Special E-Book Rainbow Package" and get your FREE SOP 101 Audios just click here TODAY! TWITA! (That's What I'm Talking About!)

If the link above does not work for you and you want to take advantage of this offer please just email me and we will make it happen. Also, the e-books will be sent to your email box within 24 hours of receipt of payment, you will not need to download them. Thanks in advance! Happy New Year!

Jeff's Speaking and Instructing Schedule

         Location                    Date                               Event  (click for info & registration)       

Contact Jeff today for information about having him Speak or Teach to your group!

Jeff Armstrong is President of Armstrong Capital. He is a member of the Million-Dollar Club, a Master Broker, visiting instructor for the American Cash Flow Institute, instructor for Nouveau Riche and the author of several best selling industry books. He can be reached by calling 800-845-3055, faxing 818-865-2323, e-mail jeff@armstrongcapital.com, or visit www.armstrongcapital.com and click on "Note Brokers" for answers, articles and information about his Master Broker services and how Armstrong Capital can help you succeed.

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