After focusing on seller financing and master leasing for a bit, we circled back around to talk about note investing on our Property & Paper Live this week. They are all different sides of the same coin.
I talked about a note deal I closed earlier this year with one of my investing partners.
We solved the note holder’s cash problem without gutting income that could support them down the road. Win-win for everyone.
We bought a partial (just 28 pmts) of a note secured by a church / country store 😉… our ITV (investment-to-value) was less than 25% which was very safe for us.
The interest rate on the note was 0%, so obviously, to create a decent yield we had to discount the balance of the note… at least the portion we were buying.
Because we only purchased 28 payments, the investor’s funds would amortize down super quickly, meaning that most of the monthly payment would be the return of principal with a only a small amount of interest.
From a risk basis, ordinarily an investor would be happy with 10%, but because of the crazy short term, the yield needed to be much higher to make it worth the time to do the paperwork and tie up funds.
I go through all of the numbers in detail in this week’s zoom session.
Later in the call we went into even more detail and talked about the little known risks of partials for the note seller…
A story I told from the ‘old days’ underscores the need to trust the operator… and the operator’s employees.
Who you do business with is more important than the numbers.
Additionally, most licensed servicers aren’t especially adept at partials, which can be challenging.
Because this note wasn’t secured by a primary residence, and I have Mortgage Office (slick servicing software), I am able to service this note myself and make sure all parties are dealt with fairly.
In times like these, buying partials is one of the safest ways to invest as well as solve problems for people in a fair and equitable way.
If you want to invest in notes, please feel free to fill out my investor form and we’ll see if we are a good fit for each other.
If you have a note you’d like to sell part of, please email me or submit your info via my note submission form.
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To grab the first 20min or so of this week’s Property & Paper Live, check out “0% Church Note Partial Pays 16%” on YouTube or Podcast.
To access the FULL replay, join the Citizens of the Realm community and click on the “Learning” tab.