Armstrong Capital Newsletter

August 2007

Jeffrey R. Armstrong

Editor of the NoteWorthy Newsletter

President of Armstrong Capital

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Hello again! J  It’s the middle of summer and I hope your businesses are running smoothly. Over the last several months we have been adding details to the flow of a private mortgage note transaction.  We’ve discussed several different ways some consultants and note brokers subtract their flat fee after they have obtained the prices and touched on how to present your adjusted offers to the sellers in a positive light. As I mentioned last month one of the ways to positively present your services to a note holder is to offer several different options.  So, let’s go over some of the most common options that are currently used by our funding sources.  This month we will talk about two of the most popular, the Full Purchase option and a Front End Partial Option.

Full Purchase and

Partial Purchase – Front End Payments

Note Example:

• Single Family Home – owner occupied

• $95,000 Sales Price

• $90,000 Face Value Note

• 10% Interest Rate

• 15 Year Term (180 Payments)

• $967.14 Monthly Payments

• 24 payments have been made. The current

• Balance owed is $84,257.19

• Loan To Value = $84,257/$95,000 = 89%

Possible options from a funding source:

1 - Full Purchase:                      $ 66,229.74

2 - Partial Purchase – Front End Payments - Sell the next 5 years of payments (60 payments). Then receive the last 96 payments.

Note Holder Gets:                     $ 40,653.53           CASH NOW

                                            +  $ 63,736.27           Loan Balance in 5 years

                                                $104,389.80        Total Cash to Note Holder

Explanation of Options

Full Purchase

As we know, when the entire note is sold, it is always sold at a “discount” off the current principal balance of the note. One reason for this is that the face interest rate of the note is seldom as high as the market yield required in the secondary mortgage money market of our funding sources. In the example above, the discount is $18,027.45 ($84,257.19 minus $66,229.74) assuming the secondary mortgage money market yield is 15%. The discount could be more or less depending on the current yield requirements of our funding sources in the secondary mortgage money market. This is the most recognized option, the most used and the most competitive.

Partial Purchase— Front End Payments

As a cash flow consultants and note brokers you already know that partial sales are very attractive from the point of view of a note holder because the note holder does not have to take a big discount. The main reason for the discount being so large for a Full Purchase option ($18,027.45 in the example) is that the payments due in the distant future are worth much less in today’s dollars than the payments that are due soon.

In a full purchase, the note holder is selling all the payments, and not getting much for the ones at the end of the 15 year term—thus the large discount. In a partial purchase, where the front-end or near term payments are sold, most of the payment is interest. This means that the note holder gets a sizable amount of cash now ($40,653.53 in the example) and when the note holder gets the note back after 60 payments, the balance of the note is still fairly high ($63,736.27 in the example) and that doesn't count any future interest that may be received as well.  The note holder then gets the remaining 96 payments of $967.14.

A partial sale of the front-end payments is like having your cake and eating it, too. The note holder gets a sizable chunk of cash now, and when he/she gets the note back, it has a high remaining principal balance and lots of payments left to collect.

In the example above, the cash the note holder receives now plus the remaining loan balance the note holder receives in 5 years is more than $20,000 higher than the current principal balance of the note.  In many cases, note holders prefer this type of an arrangement rather than selling the entire note for a large discount off the current principal balance.

These are just two of the many options that we can give to note holders. Once you have these in your arsenal and are able to find the sellers need it is easy to present yourself and your services to note holders in a positive light.  Next month we will look at a couple more of the different ways we can purchase a note and the different options we can give to note holders.  Keep on marketing, it’s going to work!  J

Jeff Armstrong

Reminder!

I again would like to extend and invitation to all of my Armstrong Capital Email Newsletter subscribers to join me at the 21st Annual NoteWorthy Convention in Las Vegas October 4th-7th, 2007.

Click here for more info on the NoteWorthy Convention.

The room block at the Tuscany Hotel Expires on August 31, 2007, so book your rooms early to get the lowest rate possible!

Some of the speakers already scheduled for the convention include Ed Lisogar of National Capital Corp, Lonnie Scruggs, Barbara Graff of Graff Liquidation, Rick Callihan of BayView First Funding, David Butler of Hotspur Investment Group, Marty Granoff of Granoff Enterprises, Joanne Allen of Unifunds, Eddie Speed of Colonial Funding Group LLC, Joel Cassway of Financial Seminars Inc., Scott Harenberg, Jeff Armstrong of Armstrong Capital, Jon Espersen of Expert Processing Services, Steve Drucker, Angela Whiteway of A-1 Note, Henry Dvorken of Courtman Mortgage Companies, Michael Morrongiello of Sunvest International, Inc., Tom Henderson of H & P Capital Investments LLC, Bill Tan, Kendal Blunck, and more TBA!

Click here for the Current 2007 Agenda PDF

Click here for the Thursday Pre-Convention Workshops

Sign up immediately.  (Get the early special with this pdf download.) Or call 800-487-1864 for the form.  Don’t miss out on the 21st NoteWorthy Subscriber’s Convention. Early Registration good through June 30, 2007. For more information call NoteWorthy at (800) 487-1864
For discounted room rates, call the Tuscany Casino and Hotel at 1-877-887-2261 before August 31st!

Make sure you check out the Pre-Convention Workshops on Thursday October 4th as well.  I will be doing a new One-Day Beginner Class.  I hope to see you there! :)

Jeff is the Editor of the Noteworthy Newsletter, a printed monthly publication.  If you are new or experienced in the Cash Flow Industry I encourage you to check out and subscribe to the Noteworthy Newsletter, an indispensable newsletter for Note Brokers, Note Buyers and Real Estate Investors. Just click here and then click on "Newsletters" at the top of the page. This month you can subscribe for only $55 per year! 

***Free gifts when you subscribe***

Jeff's Speaking and Instructing Schedule

         Location                Date                          Event  (click for info & registration)       

• Las Vegas, NV         October 4-7, 2007                  NoteWorthy Convention

• San Francisco, CA    May 22-25, 2008                   Growing Wealth 2008 Convention

For more great strategies, don't forget to check out Jeff's informative cash flow books for Scripts, Tips, Marketing ideas and more!

For a complete description of all Jeff's books just click HERE today!

Purchase the "Consultant Combo" which includes "Scripts and Tips", "Every Single Profitable Note Marketing Idea In The World (almost)" and Jeff's newest release "Personal Cash Flow Prosperity"!  That's all 3 cash flow books today for only $135.00!

Includes FREE Glossary of Private Mortgage Note Terms too!

Personal Cash Flow Prosperity With Tail Ends: How to Keep a Piece of the action	Every Single Profitable Note Marketing Idea In The World* (Almost)	Scripts & Tips: A Handbook for the Serious Note Broker

All Books Now Available as E-Books, click here for E-Books!

Jeff Armstrong is the Editor of the NoteWorthy Newsletter, www.noteworthyusa.com and President of Armstrong Capital. He is a member of the Million-Dollar Club, a Master Broker, visiting instructor for the American Cash Flow Institute, and the author of three best selling 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 questions and information about his Master Broker services, Mentorship program how Armstrong Capital can help you succeed.

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