“We needed to seller finance because my credit is poor and my wife is from Canada” This is what one man from New York told me on the phone one day. And although you might think there could be a large difference between the U.S. and our friends from the north, they too have low interest rates like we do right now. In fact 4 year fixed rates are as low as 2.99% says Canadian Mortgages Inc.
Market Conditions and Overview of the Business
Despite these low rates it is extremely difficult for Americans to obtain these loans because the qualifications to obtain such loans are too rigorous. Call any mortgage broker and you will find you need a 700 credit score or a 20% down payment which many people just don’t have especially after banks increased their payments as per their option ARM (trap loans) and took their equity away from them and sold to other parties for what they were owed. This took the down payment out of the hands of the people and left many Americans so badly damaged in terms of their credit score and cash reserves to put down any money for a new home that they are forced to rent until the foreclosure falls off their credit score, or are they?
Seller financing is the way out. Many smart investors have been resorting to it. And often investors make the assumption that if they decided to take monthly payments instead of an all cash offer, that they would be stuck with that payment stream. But they’re wrong.
What smart investors are doing now, since the banks are lending less to retail buyers, is seller financing. If the banks don’t want to lend loans paid by payors with a 650 FICO with 10% down, paying 9% interest, amortized for 30, due in 10 years, then investors will buy those mortgages all day long from the smart investors who sell with seller financing.
So now real estate investors that prefer to buy and immediately sell houses can now do it without waiting 90 days so that they can reach buyers whose lenders have “anti flipping” rules. In addition to that, the investor’s phone will be ringing off the hook since they advertise their home with seller financing. Then, after you take 10% you can sell your 90% mortgage to an investor like me for more cash and in less time. (A.W. Distad, C4PN Blog)
How does this apply on international terms?
Recently Canadians have been enjoying the currency exchange since the U.S. dollar is lower in value with respect to the Canadian dollar. This means that when they actualize their investment whether its -real estate, or real estate secured receivables- they have not only met their scheduled return on investment (ROI) but they have also increased the worth of the money coming back to them.
A Problem Faced In The International Market
I feel that a huge problem international investors face both in my industry and in the financial services industry as a whole is that when foreigners gain investor capital there are some people who will sometimes claim investments are available when in reality the investments don’t even exist. They’ll promise a return, sweet talk, handle objections, and then pull a “Bernie Madoff” and I am referring to the man we have all heard about in the news that did what I just described. Then you hear of other people like him that pooled money promising returns and paying the old investors yields with new investors to make it seem like a profit was being turned and then they amount so much cash without new investors coming in to pay the old ones that their scheme collapses.
My operations however are completely legitimate and legal, I am just finding investors to place with mortgages that people need to sell because they would rather have a large amount of cash instead of the small payment stream. How can you be sure of this? A potential investor of these instruments can rest at ease that their money is being put in a legitimate place by simply contacting an attorney of their choice in the area of their investment who will confirm that they can have a both a promissory note (a debt instrument) and a deed of trust (a security instrument) which will be recorded with the county clerk or recorder and they can be further advised by their attorney as to their options for recourse in the event of default.
Transparency International made a good point that when a corporate governance goes bad investors can get burnt. So this is a very real and well known risk that some people will just try to sweep under the rug and ignore international investing all together as an easy but inappropriate solution.
If only they would look at ways to guarantee a secure investment and consult with legal advisors and authors of that country a whole new door would be opened to them.
The Facts
Currently there are over $91,000,000,000 in owner financed mortgages across the United States. (Dalbey, Page 2). It’s a multi-trillion dollar industry!
People have been so grateful that I got them cash instead of their monthly payments. “Thanks for helping me to sell and close on the note. When I need to sell another note, I will definitely use your services again. Thanks, Donacin D.” said one recipient of 76,000 for his 90,000 mortgage in Walnut Creek California.
“It was not by chance that we began working together. You would not believe how many offers that I have turned down and for more money, but if it was not what God wanted, then the amount of money did not matter. We had a divine appointment! God bless, Sherry S.” said another happy promissory note seller.
The following are some of the advantages of real estate notes, the reason they are the best investment, and why people could stand in line to buy each and every one that I find (Dalbey, Page 14):
- Safety
- High yield
- Live anywhere
- Monthly income
- No money needed
- Full or part time
- Unlimited profit potential
- Never a bad time to own notes
- High probability of early payoff
- No property management hassles
- Returns both interest and principle
- No employees, inventories were overhead
- Increased knowledge of real estate investing
- Benefits of real estate ownership without the hassle
Both American and Canadian investors can rest at ease in knowing that investing in real estate notes is a safe investment because, unlike stock in the stock market, real estate never plummets to equal zero dollars in value. There will always be a demand for real estate, it’s just a matter of how much demand. There are also laws in place and judges who enforce the laws of legally binding contracts. These contracts are typically promissory notes which are debt instruments, and mortgages or trust deeds (aka a Deed of Trust) which are types of security instruments tying the debt instrument to the property. The laws stating that owners of promissory notes that are secured by a mortgage or deed of trust state in so many words that if the owner of said instruments is supposed to be receiving payments but the payer making said payments is in default, that the payee may foreclose and receive title to the property in an effort to recoup their losses. Of course the payer is not breaking a criminal law, and there is no criminal penalty, it is simply a civil law being enforced and such penalties can include both seizure of the security property as well as personal property if the real estate is not enough to help repay the debt.
The Security
Your transaction is closed by an attorney or title company, your lien priority is insured by an insurance company, and your documents are recorded at a county court house. The liquidity is shocking because other investors can buy from you what you have already bought at or above the price you paid for it in a matter of days with a simple assignment of mortgage also processed by an attorney or title company and recorded at the county court house of the state the security property is in.
In Perspective
Investing in real estate notes is about creating wealth with passive investments secured by real estate for a safe and very attractive return. Most people try to generate a retirement income by following all the conventional wisdom letting other people control their money and make their decisions for them. By the time they need the money they discover that barely kept up with inflation. The cost of living has risen faster than their investment. Buying real estate notes is not conventional wisdom. I would challenge you to show me one super wealthy person who earned his or her wealth by conventional wisdom.
Do what everyone else does, Get what everyone else gets
If you do things like everyone you’ll probably not likely be satisfied with the low returns everyone else is getting. So what qualifies me to bring you the message?
How I got started
About 5 years ago I was a school district employee looking for a way to make more money and get out of the job trap. After a long search and buying some books on late night TV I decided that becoming a real estate note investor was what I wanted to do and I made his decision for a lot of reasons. I started with nothing and over the next few years made thousands of dollars and helped others make thousands along the way. Eventually I got so good at what I was doing I chose to begin teaching others the tricks of the trade and started mentoring others as I myself was mentored by long seasoned industry professionals who had been buying notes for 10, 20, 30, and even as much as 40 years. I learned some lessons along the way I tell you the truth: I learned them the hard way. Then I started to systematize the business making it easier and flow freer and have come to look at myself as sort of an innovator, I hope to someday be the nation’s leading authority at what I do and hopefully, as a result of this class research, expand to parts of the world I can’t even pronounce.
A recent epiphany
Lately in my career I have discovered a little known method of acquiring capital to buy notes so that I could increase my profit. I am learning this is not only good for me because it makes my job easier, but it is also good for the investors that I build business relationships with. Rich doctors and lawyers both in the United States and Canada can now achieve much greater returns than stocks, CDs or regular bank account interest rates. They will be ecstatic with the results once I start assigning them notes instead of the typical investors that I work with. Once they see their money grow at an outstanding rate, when they go to bed at night, they would be able to care less what had happened in stock market that day. The program is very simple, in fact completely hands off for them. They don’t have to check the stock charts, call their brokers, or wait for the next crash. I just go find a good note secured by a piece of property and agree to buy it at an all cash wholesale price. When I started this business, it didn’t take me long to realize there were a lot more notes available than there was investors, the problem was that investors often paid much less than sellers were willing to accept so I wasn’t able to make the deal work.
The problem is that banks and other lending institutions don’t buy real estate notes that property sellers create from sales. If that doesn’t make it hard enough, even if I could find a bank to make a loan to buy notes with a line of credit, I need to be a home owner with equity and have a good credit score and a large net worth.
So now I have found a better way. I have started talking to folks with a little money to invest who don’t mind a smaller interest rate and I have created a program where they can buy the promissory notes that I find secured with a first mortgage or deed of trust on the house and I deduct my fee and present the price to the note seller as always and this will became a very lucrative investment vehicle for that very reason.
But the first concern is safety, however when I make offer on promissory notes I only offer 60-65% of the value of the house. This leave a lot of equity as a safety cushion in the case of default. I am sure it won’t take my new buyers long to realize that if the payments weren’t made that they would end up owning the property at a deep discount. If that happened, they could hire a realtor to sell it and make more than their interest, so it’s a bad thing for them at all.
The higher than usual return is very attractive. And it’s not problem that my note buyers get a lot more than a CD. And that’s the least they could expect to make regardless of what was happening in the stock market. They get to have a high return day in and day out that they can rely on. This was and still is very attractive rate regardless of what the market has done. A common misconception is that the payer starts paying a higher rate when in fact, their payment stays the same. Investors can get 8-12% returns because they discount the note so that it will make their desired return, but that’s on a worst case scenario that the note will be paid as schedule. In the event of an early payoff, their returns skyrocket!
And I will offer this high return because the availability of their money is way more important than having them pay the balance on the note, because note sellers often understand the need for discount but it’s the amount of discount that stops many of them from selling. If I don’t raise the money to buy notes at a more competitive rate, I miss out on a profit all together because there could be people willing to pay more than what my current investors can do.
So the note buyer has a good dependable safe return well secured by real estate, and they supplied the capital to grow my business. And the note seller has their cash instead of a life long payment stream. It’s a win-win situation for everyone!
Incidentally, buying loans is nothing new. There are banks and companies in every city doing it right now and have been for hundreds of years. Like I said, It’s a multi-trillion dollar industry. They survive on lower loan to value ratio loans, made to payors with high credit scores and big down payments. Their niche is people who want refinance or purchase a home to live in who can qualify for a nice low interest loan. Our niche is people who cannot qualify for a traditional bank loan. We typically do not buy loans paid by perfect credit payors with big down payments.
Before we get off topic, pull out one of your credit card statements and look at the rate. Congratulations! You’re a person who is paying money to an investor who is receiving a high interest rate. That’s pretty easy to understand. Like I said, it’s a multi-trillion dollar industry.
But here is the real kicker, what if we turn the tables on the banks and grow rich the same they have by using other people’s money? When banks make loans they do with your money. The money you’re allowing to lay around in a savings accounts and in CDs that net less return than the rate of inflation. You receive a meager interest rate while they loan your money out at a higher rate. Then they receive the difference between the two rates that they refer to as the “spread”. The spread amounts to billions of dollars monthly and that’s why the banks have the big buildings and tons of money
Here’s an ideal: Why don’t people become a bank? (In a way) If you can borrow money at a lower rate and safely purchase mortgages at a higher rate you can make a fortune off the spread. That’s the beauty of it! You get to make money off the banks money! Don’t you just love the mere thought of it? I know I do.
Now let’s look at what we have done, if you aren’t using your money you have the best rate of return after all: It’s called infinity. You see, if you’re using none of your own money, and you get a return then you can’t measure that return so your return is infinite.
Moving Forward
In order to penetrate the Canadian market I must simply market and educate Canadian investors. Converting their currency of the CAD for the USD is no problem. My neighbors that spend the winter in Palm Springs and fly back to Canada for the summer do it all the time. There are many institutions that convert currency by wire transfer all the time at a small fee.
Education is critical
I have been developing and continue to develop educational materials including a book, audio CDs, and a DVD explaining the benefits, risks, and the security of real estate investments. The international concerns are small because Canada is so close and so similar.
So now you can get a safer return than the stock market! Imagine having a safe and secure investment like real estate without all the headaches of ownership. Imagine doubling your money every 4-5 years.
If you’re reading to move forward, give me a call at 760-296-1573
Regards,
Andrew Distad
Investor
Cash 4 Promissory Notes
http://www.Cash4PromissoryNotes.com
Andrew@Cash4PromissoryNotes.com
(760)-296-1573 Office phone
(760)-296-1573 Fax
P.O. Box 52 La Quinta, CA 92247
“Get the most cash for your promissory note by creating the best note!”
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References
Dalbey, R. (2007). Winning in the Cash Flow Business. West Minster Colorado: Dalbey Education.
Distad, A. (2012, 02 05). C4PN blog. Retrieved 02 05, 2012, from WordPress: WordPress.cash4promissorynotes.com
Distad, A. (2012, 02 05). Cash 4 Promissory Notes. Retrieved 02 05, 2012, from http://cash4promissorynotes.com/Testimonials.aspx
Legrand, R. (2007). How to be a quick turn real estate millionaire. Chicago: Dearborn.
Pontell, H. N., & Geis, G. (2010). How to effectively get crooks like Bernie Madoff in Dutch. Criminology & Public Policy, 9(3), 475-481. doi:10.1111/j.1745-9133.2010.00643.x
Transparency.org. (2011). Retrieved 05 2012, 02, from Transparency International: http://blog.transparency.org/2011/09/05/cleaning-up-finance-when-corporate-governance-turns-bad/
