Note Business Tip of the Month 

July 2009

 

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....

           The initial discounted pricing of a note is not solely determined by the investors yield requirement? It also may include the individual investors risk tolerances, previous experiences, minimum discount and cents on the dollar calculations (just to name a few).

         

*Quote of the Month:

         Freedom lives in being bold.

                        - Robert Frost

 

*Question of the Month:

 

Q - Jeff, first off, let me say thanks for the check and allowing me a larger
commission than I was due. As I look at the deal, I tried to use the 1.5% of the balance of the loan as a benchmark for covering costs (Secrets of Paper 101).  Is this still a good rule or should this number be higher? What about deals where a seller would like to use a title company or attorney for the closing? How much would one factor in for this? Any thoughts would be appreciated.

    Second, is a question about trying to do the note business full time.  I pretty much started the end of March/early April. For that Apri) I tracked a 1.36% response rate and in May 1.16%. In June, I tracked my best direct mail combination at 2.83% response. These response rates in general seem low. From a deal perspective I have your deal funded, one that is in the title stage, and a partial that I have a verbal commitment on and I am waiting to get the seller under contract.  In addition, I have lost one deal today in fact (credit issues caused the investor to lower the offer and the seller rejected) and I have one deal where the seller is considering.  At best that is 4 deals. I guess as I continue to try and move forward, I am concerned that in order to really do this full time I need to send more letters a month than I can realistically budget for. Given the choice between increasing the number of letters sent versus sending smaller amounts of letters and working on increasing my response rates I'm not sure which way to go. Any thoughts on what to focus on in order to increase the likelihood of doing this full time. As it stands, your check is my first, I was hoping given the amount of letters that a couple more would have funded by now. Any thoughts would be appreciated...
                                            - Edward T.

 

A - Hi Ed!  Thanks for the email! I will attempt to address all of your questions and concerns. On the transaction we just closed the costs were above normal. Usually the 1.5% guess-timate more than covers the expenses. That deal had many hurdles and extra expenses to get everything in order. That high of a percentage of expenses doesn't occur very often. Except on commercial properties where the appraisal fees are much higher than a residential appraisal. When a seller wants to close it with an attorney or title company we will pay up to $100 of the cost of that. After that the seller has to ay for it. When the seller hears they have to pay for it all of a sudden they don't mind doing it through overnight mail. :)

Direct mail is a huge numbers game. For one I think I would add some additional states to your mailings. If you are getting 1% response you are doing good, anything higher than that you are doing great. I like that you tested several different letter combinations and narrowed down your best so far, that's what needs to be done to make your marketing efficient. Also remember that you are not done calculating any of your monthly stats. You will get responses 2,3,6,12 and even more months or years from now on those same letters you sent in April, May and June. Your stats seem to be in line with what I consider normal. My personal stats, on average I close one deal for every 40 worksheets right now (and I've been doing this for almost 19 years). Again, direct mail is a big numbers game and should only be a one component of your entire marketing plan. Remember? You should have 3-5 lines in the water at all times? It seems you only have one line in the water. 

Honestly, I wouldn't think of going full time or quitting your day job just yet until you have a consistent number of deals in the pipeline maybe one a month or two a month, etc. Focus on the responses that you did get. Follow up with them every couple of months even if they said no. Send them an extra follow letter or postcard. Call them, email them. Ask them if they still have the note or did they sell it? If so to whom and for how much? If they still have it do they need some cash now? Can you update their prices for them? etc. That's how you start making the most out of your responses, follow up. Too many note brokers just throw out the worksheet if they say no and never follow up. Separate yourself from the herd and follow up.

Hope this helps!  TWITA! 

 

Jeff 

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.

Powered by YMLP.com