Beginners and Small Investors Making Money in This Economy

General Real Estate Investing
1

I’ve been around this business for a long time (20 years) and although the market has fluctuated several times, it has never been this challenging! For most of you ‘newbies’ who want to sustain and be around to make the ‘big bucks’ when the market is strong, here is what I would recommend that you consider.

Create Notes & Resell to Investors

Here is an example that I have done over the years:

  1. Buy a mobile home on a rental pad ~ Cost $3,000
  2. Resell to an owner occupant for $500 down and $200/month for 5 years
  3. Take the title, promissory note, sales contract, and insurance as a package and resell to an investor (IRA and Pension Funds work well).
  4. Repeat Process.

There are many considerations you need to know in order to do this type of transaction in order to protect yourself and your investors who are funding this which are easily learned from experienced investors or from some published courses.

The mobile home could be substituted by a car, truck, trailer, business equipment, etc. This type of transaction is simple, it provides a service or benefit to ALL who are involved in the transaction, and it is very profitable for you and the investor!

The above example that I have done was sold to an investor at an 18% yield, which makes the investors very happy to take on the small risk of this investment. Here is what it looks like on your cash flow calculator.

60N 18% i/y $200 PMT $7,876.05 PV

The invesor writes a check for this finance paper for $7,876.05 which brings you a profit of $5,376.05 as you only had $2,500 left in the transaction ($3,000 purchase price minus $500 down payment). The $5,376.05 buys alot of groceries and covers alot of your personal expenses which will keep you in business while you await a market recovery for real estate deals!

There are an endless number of transactions to be had as there are people who need and want these items and cannot get bank financing. Also, there are endless sources of investor funds for these simple and high yielding investments. There is over $7 trillion just in pensions and IRA accounts!!

This is a viable method to make money in our current economy while beginners and small investors await a real estate market to recover.

Rob in Atlanta
R.E. INvestor/Mentor

2

you make it sound so easy. I am in such a rural area how can I or how do I have to modify this strategy? How do yuo find the IRAs and Pension Funds to purchase your property at a profit?

3

In rural areas, there are more opportunities for mobile home deals than in larger cities. Also, the lot rents are more reasonable which makes the opportunities even sweeter. Regarding IRA and Pension funds, there are $7 trillion sitting in these plans in the U.S. How do you find them? Just ask!! I ask everyone I talk to, “how much of your IRA/Pension Funds are earning under 18%?” Then, you would be surprised to hear that most people will respond, “ALL OF IT!” Then, I am in the middle of a presentation of one of my notes (or upcoming notes) that is available for sale. Try it! It works.

Anything seems difficult that you haven’t done before. Just do it and it will become easier each time!

Rob
R.E. Investor/Mentor

4

I am going to have to do some more research on this because I am not understanding all the terms you are throwing out. IF you know of a great place to do this please post the link.

5

Rob,

I am trying to run the numbers that presented, and I can’t see how you are coming up with an 18% investor yield. Perhaps you could break it down a bit more so I can see where your getting your percentages.

6

Please do not complicate my formula! The 18% is used as an example that I use often to resell the created note to an investor to liquidate, recoup my investment plus a profit and move on to the next deal.

I would be glad to walk you through this if you email or call.

Rob
R.E. Investor/Mentor

7

I too was confused by your numbers Rob, as there were some details missing. However, I played around with the numbers to find out how they apply to this example.

Rob bought it for 3000, sold it for $10,500. Took $500 as a down payment from the buyer and financed the remaining $10,000 at 7.5% (approx). Then he sold the note to an investor for an 18% yield, means he got $7,876.05 for it. After his costs, he made $5376.

8

Could you elaborate more on where you’re getting your percentages from? I don’t understand where 18% and 7% are coming from.

9

The 7.5% is the interest rate on the $10,000 mortgage/note.

As for the 18%, it is difficult to explain as I do not know the exact equation. I used a program/calculator that is on my computer. I will however try to explain it as best as I can…
Rather than wait for each payment, Rob sold the note to a note buyer/investor for an 18% yield.
A $10000 note with an APR of 7.5% amortized over 5 years will result in a monthly payment of $200.38. The total in finance charges will be roughly $2022 and the total of all payments will be $12022. Now use the loan calculator to determine the payments fora loan of $7,876.05 at 18% for 5 years. You will get a monthly payment of $200, a finance charge of $4144, and the total of all payments will be $12000.

So the value of the note has not changed. Rob just took a discount on the note to sell it for cash. Eventhough the interest rate on the loan is 7.5%, the investor gets higher return on their investment because they paid less than face value for the note.

Make sense now?

10

Seems there are plenty of people here wondering about the numbers. Why not explain it here for the benefit of all?

11

Why yes it does kind sir. Thank you for taking the time to clear that up for me.

12

Good job explaing my numbers! If you plan to be in this business, you need a cash flow calculator and you need to learn how to use it!!! Otherwise, you are in the dark. Why not buy a Texas Instrument BA II or BA II Plus. Also, Jimmy Napier wrote a book call ‘Invest in Debt’ which also explains how to use this. Furthermore, Lonnie Scruggs, who referred to me in one of his early chapters of ‘Deals on Wheels’ has several books he wrote that you can buy online and learn this winning strategy.

Lastly, I did not sell at 7.5% as that would raise the price of the mobile home too high! I would typically use 12% or 12.9% to calculate the actual sales price. Selling the notes to investors at 18% works just fine and if you understand the deal and how to present this to an investor, he will buy. You must also know what to do in the event of a default and explain that to the investor’s satisfaction for them to be confident in the risk part of the investment. That comes from experience, from research or from a mentor.

Rob
R.E. Investor/Mentor

13

So you would have sold it for around $8900, right?

What do you convey to the note buyer, and what is your involvement in the event of a default?

14

It’s not ‘around’ $8,900. The example is at 18% yield which has a present value of $7,876.05. If it were $8,900 the yield would be 12.45%. This can be determined by your cash flow calculator.

Regarding default, it is always best to prepare your investor for that event and what to do for resolution. If I handle for my investor, I receive fees for that effort. It is a simple repossession, resale, and a new note and contract.

Paperwork would include promissory note, sales contract, title through Motor Vehicle. Although this seems simple, there are many default provisions and specific issued needing attention in the paperwork. This information can be obtained through one of the courses, books, CD’s, etc. online and offered through this website or through mentorship.

Rob
R.E. Investor/Mentor