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Friday, March 19, 2010

What's The Deal with Cash Flow Notes?

Question: What's the deal with cash flow notes? The stupid things are all over late nite TV. I've Googled the crap out of it. All I can find is one bogus scam after the next. I know you've written about them before, and I trust your opinion.
T.D. Manchester NH


Answer Marc Charles:

I'm glad you trust my opinion. A man's reputation is worth more than anything he could produce in a business!

You can make money with cash flow notes. But the key is finding "legitimate" notes and "qualified" buyers.

Russ Dalbey and others claim to have a "network of buyers and sellers". But from what I've seen it's not that impressive. Heck you can find cash flow notes by running ads on TV yourself, posting on CraigsList, or hundreds of other places. You could do the same to find buyer!

Here's the deal.......

Cash flow notes are IOUs. They are essentially an agreement to pay someone a specific amount of money, with interest, over a specified period of time.

The most popular cash flow notes are commercial paper (mortgages) and residential mortgages.

There are cash flow notes available in almost every conceivable real estate investment. And most of these are secured with a title deed.

You can find cash flow notes for everything from accounts payable, structured settlements, royalties, leases, pre-construction, and more.

Here’s an example of a simple cash flow note…

The Johnsons sell their $250,000 home with owner financing.

The Johnsons ask for $25,000 down and finance the balance of $225,000 at 10 percent interest. The Johnsons receive monthly payments on this note until it’s paid off.

This is where the “cash flow” part comes in.

An entrepreneur calls the Johnsons and offers them $220,000 for the note on their home. The Johnsons agree. The entrepreneur buys the note and then resells it to another buyer who is willing to pay $225,000 for it.

The first entrepreneur keeps the $5,000 difference and the Johnsons get $220,000.

The process is contingent upon locating note sellers and brokering these notes to willing buyers. And in the real world it takes a lot of time, energy, and money to build a network of qualified cash flow note sellers and buyers.

Entrepreneurs are making money in this business.

But remember there are already sharks in the water....bankers, lawyers, and other real estate investors!

So if you're new to the business and market....be patient. Give yourself some time to learn how savvy entrepreneurs are making money.

On top of that, keep it simple and take action....do one deal as quickly as possible.

Too many entrepreneurs ask way too many questions. They also exert way too much energy making sure everything is in place!

What's more, most entrepreneurs spend too much time talking to losers (people who have NEVER made any money in real estate or the cash flow business).

So...bring yourself up to speed, and then act. Don't discount Google.

I know you "Googled the heck" out of this thing. But believe me....Google is the one tool you can't live without. Become a master at using Google.

I hope that helps!

Later.......

MC

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