Cashflow Investing Basics

Basics of a note investing business
You are starting a business that will take time and effort. This is not a get rich quick scheme.
It is very important that you realize that and that you are willing to put some serious work into it.

One of the first things you need to do as you start your Notes business is to write Goals. Make sure you know where you are going with the business. Included in this newsletter are some areas suggested areas for goal writing. Put some thought into them and be personal and specific.
1.Personal Goal. (something you want to do or change with yourself)
2.Physical Goal. (Something for the body. Exercise, nutrition…)
3.Relationship Goal. (Something to strengthen a relationship in your life, partner? Friend? Family?...)
4.Family Goal. (A goal for close family? Extended? Your own? Future family?...)
5.Financial Goal. (What you want out of this business. Long term and then break it down to a weekly process)
Organization
Once you have your goals down it will be time to organize your business and get started;
1) Get a planner for weekly schedules. (Computer, palm, notebook, Franklin Covey, Day runner…) This will be used for both the time management of your business. Know when you are working in the business and what you are doing with that time. This is crucial to your success! I recommend that you use an electronic device that will beep at you to remind you when you have things to do. If you will make sure you schedule yourself and the time you are going to spend with your business then you will find more success in your business.
2) Also for taxes. The benefits from taxes will pay for your business within the first or second year! Make sure you get some competent advice on this subject.
Note Business Basics
It is important to understand what the “note business” is all about. It is very important that you realize that we are not talking about investing in property in the note business. A note investor is similar to a Stock investor. The main difference is that the person investing in stock does not have a guaranteed return. The note investor has a guaranteed return on his investment backed by the Real Estate. The actual investment is just the payments being made on the note.
One of the important aspects of the note business is to completely understand the investment involved. Perhaps the best way to clarify this is to give an example: Johnny seller wants to sell his house for $100,000 and he has had it on the market for a while. Finally someone comes along and says they are interested in buying it but they do not want to get a conventional loan. They can put a down payment down but they would like Johnny to “carry the balance” in a note. This means that the seller and the buyer will create a contract that states that the buyer will pay Johnny $XXX per month for XXX# of months. They have just created a note. Johnny sells the home and gets a down payment and then starts to receive the payments each month. Johnny is a note holder. He no longer owns the property. He sold it. He does own the note which states that the payor has to pay him each month for the privilege of claiming ownership for the property.
Many investors these days are looking for 1st position notes only. They are often not interested in second position note. If they are purchased they are going to be at a very steep discount. This is a great area of the industry for you to start investing in if you are looking to buy notes. To help you understand some of the lingo of the business I will give you a list here of some definitions:
•Real Estate Note: A Real Estate Note is a written document that states a promise to pay for a Real Estate purchase and the terms of that purchase such as the amount due, payment amount and interest rate and length of time to be paid…Real Estate Note, Trust Deed Note, Mortgage Note, Promissory Note, Land Contract are all the same thing.
•Seasoning: Seasoning is the life of the loan. If it has been around for a year it is considered seasoned. If it is less than a year old it is considered unseasoned. Unseasoned notes can still be very good notes to deal with. This is not the only deciding factor in selling a note. I have personally made money on notes that were unseasoned so I recommend you do NOT limit yourself to just seasoned notes. Work with anything that comes your way.
•LTV: Loan To Value which is the total loans or liens against a property divided by the value of the property then converted to a percentage. (ex. .85=85%)
•Equity: opposite of the loan to value figure.
•Amortization: length of time to pay off the loan in full with current payment setup.
•Balloon: Lump sum payment usually due at the end of the note term. (interrupts the amortization)
•Wholesale Offer: This is an offer from a note buyer when they are NOT planning on paying the closing costs.
•Retail Offer: This is an offer a note buyer when they ARE planning on paying the closing costs.
•Underlying Loan: This is a loan that the note holder owes held by a bank.
•Investor: person who will be buying the note for this deal.
•Broker: person who works for the Investor. Does the paperwork and a lot of the prep work for the investor
•Finder: Person who finds the note info and refers it to the broker or investor.
•Note holder: Person who sold the property and holds the note.

A break down of the business process;

•Foundation work & Preparation
•Finding and Marketing to note holders
(This will require a marketing budget and maybe a few marketing campaigns.)
•Gather the information and find out their expectations
(Here you will want some sort of database to assist in keeping track of details.)
•Present the note to investors
•Present an offer to the note holder
•Complete the deal with paperwork and follow-up

Bringing it all together:
In conclusion if you are looking to start your own note investing business you should start with writing some clearly defined goals so you know what you are looking to achieve. Make efforts to be organized as a business and understand the industry you are getting into. Below you will find some resources that may be helpful for you as you start this business:
vistaprint.com for free business cards!
Toll Free Number: It will be important for you to setup a toll free voicemail number in order to get more calls coming in from your marketing. Note holders will be more likely to call if they don’t have to pay for it. So, don't forget to get your number. You do not need a new phone line put into your house for this. These numbers are completely independent of any phone line. You are able to check the messages right on your computer.
Suggested Reading: “The Millionaire Next Door”
Suggested courses: CashFlow Investing by Mike Wood