Online Investing Daily

A Look at the Cash Flow Note Business

My friend Heather, flew in this weekend to celebrate her 40th birthday.

We went to the Samovar Tea Lounge near my house, and over some white tea and salmon salad, we spent hours catching up.

It was blissful.

She told me about a current project that she was working on, and it really left an impression on me.

I instantly thought about how her story related to my cash flow note business. Simply because not only did the story have a direct impact on your life but it also impacted the way you interacted with other people in your community.

How Heather’s Story and The Cash Flow Note Business are Related

Heather is a very talented artist, and in her line of work she tell storeies though different types of media. This is very different from my speciality for buying notes.

The project that she is working on now, documents the life of a member of the Skagit Indians in the state of Washington.

What she told me was that this woman was a community builder - a wise woman in her tribe. And when Heather interviewed this woman in 2001 before 9/11 - she told Heather that people were no longer “fulfilled”. They were “emptier and emptier”.

This when Heather brought up the Hopi poem about the Lone Wolf.

The poem was something that I wanted to share with you. So you can read it and take from it the wisdom that it speaks. This is especially beneficial for those of you starting a new cash flow note business.

Success in the Cash Flow Note Business, Words of Wisdom

Let me share the poem with you ..

“There is a river flowing now very fast. It is so great and swift that there are those who will be afraid. They will try to hold on to the shore. They will feel they are torn apart and will suffer greatly. Know the river has its destination. The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water. And I say, see who is in there with you and celebrate. At this time in history, we are to take nothing personally, Least of all ourselves. For the moment that we do, our spiritual growth and journey comes to a halt. The time for the lone wolf is over. Gather yourselves! Banish the word struggle from you attitude and your vocabulary. All that we do now must be done in a sacred manner and in celebration. The poem ends with the words: “We are the ones we’ve been waiting for.”

The Poem’s Relation to the Cash Flow Note Business?

Here’s how this applies to you directly in your (and my) Note Buying Business.

a) The river flowing very fast is this new world of investing in nonperforming notes that you’re jumping into. You must be terrified.

b) Others less adventuresome than you will “hold onto the shore” while you push on.

c) If you flow with the river, and trust it, you will reach your destination. (same goes for notes when figuring out the multiple exit strategies in your defaulted mortgage business)

d) The time for the lone wolf is over, think of it this way, if you want to really succeed in your cash flow note business; you need to reach out to people, whether those be bankers, investors, real estate agents, or title officers.

e) In your process of learning how to swim in a river moving at speeds you aren’t used to. You won’t be struggling. You will learn how to float. As you learn the lingo of your cash flow note business, learn the process, learn what the trade looks like, eventually your first deal will close. All of this happening while you let the river carry you through it.

A Tip on Your Cash Flow Note Business

“We are the ones we’ve been waiting for”. That is the most important lesson of all.

Whatever you need to do….write it down, tape it to your wall, print it and put it on your bedside table. Your new Non Performing Note Business has a new motto.

Don’t wait for anyone. You can achieve anything that you put your mind to.

Imagine this conversation…”Me, meet Me”.

The power of this simple realization should not be underestimated.

“the most powerfully creative moments for an artist are when we get out of our way, and just let our creative energy flow.” The words that Heather spoke.

Remember, it’s YOU that you’ve been waiting for.

Get out of that river now and make use of all the other wolves out there.

Get Your Note Buying Business Started

So you’re eager to get started in the note buying business and you’re wondering what kind of non-performing notes are out there to buy. Here is an example to feed your appetite.

An Opportunity In Note Buying

Note Rate: 11.13%

Balance on the non-performing note: actually $62,957 - with a $66,885 payoff

Estimated property value: approximately $112-114,000 (rough guess based on bank’s BPO and Zillow’s low range value - a cheap AVM to refer to) LTV (loan-to-value): 50%

The Note Buying Exit Strategy

So the way I look at this: I could buy a $63K non-performing note at a 50% LTV for $56K.

Thru a refinance of the borrower’s defaulted mortgage, you can pay off the loan at full amount ($66,885) in at time span of about 60 days.

Making almost $12,000 on $56,000 wouldn’t be bad in 2 months.

My return on my note buying investment would be 21% cash-on-cash, without even annualizing!

A Second Note Buying Exit Strategy

Alternatively, I could encourage the borrower to bring their non-performing loan current (a foreclosure notice might work here) and see if they reinstate my loan at the last minute.

Assuming they do bring their defaulted mortgage current, that would mean a reinstatement payment of over $4,000 plus a monthly payment of $574 - for a total of almost $11,000 in income year 1 - or a 19% return.

If the borrower refinanced within 3 years you would get a 14.6% return on your note buying investment. (to calculate, you would amortize the return over 3 years)

And finally, since you have a 50% LTV, even if you end up taking the property, you swould still have a good amount of equity.

Many ways to skin the note buying cat…