I often get questions from beginners in the mortgage note business wondering about how to make it work as a broker or investor in notes. I’ll go over a few things here to answer some of these basic questions. Hopefully this will give some answers to common questions and I hope it will help clarify the waters a bit about the note business. It is important that you understand the basics of the business you plan on working.


The first item I want to clarify is that I am talking about privately held mortgage notes. Generally speaking, banks are not interested in selling their notes. If they are going to sell notes they will want to do so in quantities often referred to as a portfolio of notes. You should also understand that such institutions will be less likely to sell good performing notes for much of a discount. this is their business. It is their bread and butter and they are not usually interested in selling those notes. that is why your focus will be to find individual private note holders. These private note holders are individuals who have sold a property and for whatever reason have decided to hold the note themselves and receive the payments over time.


Often these private note holders are not finance savvy and perhaps did not want to hold a note in the first place. This happened in the course of selling their home or property in order to get the sale to go through but was not something they planned on. Ultimately they want the cash and not small payments over time. These individuals are the ones you are looking for in order to buy or broker a note. When you look through public records, you are looking for lenders who are private individuals. Most of the data will be banks and big lending institutions. You will skip by these notes looking for those few that are private. The document you will look for will vary from one state or county to another but generally it will be a trust deed, deed of trust or land contract. These documents will often be abbreviated in the public record.


Security
So why invest in private notes? What is the appeal and what secures it if the buyer stops paying? You must understand that a private note is a security instrument just like a bank mortgage note. The property is the security behind the instrument. If the buyer stops paying then you have the right to foreclose. Of course foreclosure is not the goal of most investors and brokers. It is not a fun nor cheap process. It can be a real pain with a lot of costs and hassle. the best option is to work with your buyer as much as possible to keep them in the home and making their payments. This is why an investor in this industry will do their due diligence and why they prefer notes with a history. If the property has a value higher than the note balance and there is a history of a year or two on the note payments then it makes a more secure investment. It is more likely that a note that is seasoned with a payment history will continue to pay and there will be no need for foreclosure.

I am still seeing advertisements for seller financing and owner financing every day. It is very much alive and for many sellers the best way to get their property sold. This business is alive and well and if you do things right you can make a lot of money with private mortgage notes. I just want to take a moment and revisit the different options for marketing your business. I’m still amazed and I’ll admit it a bit annoyed that many still think there is some sort of “secret” out there that will make them rich. Well, there certainly is a secret. It’s called work.


There are some techniques that perhaps you are missing in your business but most often the only reason for failing in business is because the work is not done continually with the technique applied. The reason for failure is not the technique itself but rather the lack of application or improper application. There is very little in any business that requires only a small one time application. Most marketing requires consistent effort . Let’s discuss some of the main marketing approaches again.


  •  Direct Marketing -Marketing direct to note holders is still a favorite for many. Often this is simply because some people are more comfortable when they don’t have to talk to prospects. This happens a lot when somebody is new to the business and perhaps not a real people person. To that individual I say, great starting option but plan on stretching your comfort zone. The other reason direct mail is used is because that way you don’t have to waste time talking to people who are not interested. You only talk to those who express some interest. This can be a great time saver to allow you to put time into other aspects of your business.
  • Referral Marketing -Referral marketing is a very valuable option for any business but can be especially effective with the mortgage notes business. This technique will require years of building a pipeline to be effective for you but as you continue contacting your referring professionals and you take care of their customers you will develop a lifelong resource for notes. This is one of those things you should put time into while working on the direct mail approach.
  • FSBO -Help Create Notes -Perhaps one of the best options for working the mortgage notes business is to get involved up front. Find the sellers who are offering seller financing or who may benefit from offering seller financing and help them create the perfect note. If you have been in this business any amount of time and have talked to some note sellers you know how many junk notes there are out there. If you work with the property seller right from the start you have a much better chance of having a note that will interest an investor.
  • Classified Ads -Another option is to create ads that will bring in potential deals. This option to marketing can actually be used in a number of different ways. You can place an add indicating that you are willing to buy seller finance notes. You can place an add indicating you have notes to sell to find local investors. You can place an add to let FSBO sellers know that you can help them sell their home. You can even look through the ads that are posted to find others listing notes they want to sell or to find home sellers you can contact to help sell with a note.

find out what option works best for you and be persistent in applying it. Test different things. Try different ads and text to see if one thing changes your results and most of all remember that more than anything it is a numbers game. This is not a business you can “try”. You either do what it takes or you are not in business.

Is it a good time to invest in mortgage notes? There is so much talk about a bad economy and job loss and many feel a feeling of “doom and gloom”. Some might be led to think that this is not a good time to begin your own business. This mentality could not be farther from the truth. This is a great time for people to start their own business. The problem with starting your own business is not timing but attitude. I don’t mean that in the strictly Negative vs Positive way. What I mean is that we are all conditioned right now to be followers and workers and not leaders and thinkers.

It is a great time to work the note business because of the problems in the economy. With the issues we have seen in the banking industry there has been an increase in seller financing to help get deals closed. There are more investors closing deals with owner financing. There are more sellers being open to the idea of holding a mortgage note in order to sell a property. It is precisely what we need at this time in our history. We need a change that puts more power in the individuals rather than large institutions that are often corrupt.


This change in our economy means that as note brokers and investors there are many more opportunities. The notes are there. There is an increases rather than a decrease but you have to be prepared to do what is necessary to make the business successful for you. If you are starting this business with hopes of a change that is needed in your life then it is important that you keep in mind that the change has to come from within. It is not the business that will return to you what you want but rather you who will cause the business to grow and thus give you the return you are looking for.

I have written many articles on these topics for understanding how to run a business and how to market this business specifically. Be sure and review these articles for further insight and create the attitude that helps you become the business owner you want to be.

Many of you who are new to the notes business may be wondering if the current economical situation will be helpful or harmful for the Cashflow notes industry. With the irresponsible behavior of the banks around the world and especially in the US things have changed drastically in the real estate market. Many banks have failed and others only survive because of the foolish spending of our government. Unfortunately there is little we can do about all the nonsense that goes on in such circles but what you can do is educate yourself about the private note industry and what these changes mean for you.


With the recent changes banks and lending institutions have changed their tunes drastically. It is far more difficult today to get a loan from a traditional lending institution but we still have thousands who want to own their own home. The current economical events couldn’t be better for the note industry. Seller finance offers a perfect avenue for sellers to sell their homes and for buyers to own one. Many buyers are not able to qualify for the stringent requirements currently enacted by the lending institutions and many may have poor credit. A seller finance option will allow such individuals to get into their home and allows them time to work on repairing their credit.


This is the kind of situation that can cause quite an influx in seller financing. It is very likely you will see more notes available in coming years and if you educate yourself properly you can be involved in creating these notes and therefore be allowed first right to buy such notes. There are amazing opportunities in the cash flow notes industry right now for those who are willing to work this business in a serious way.

OK, so I have outlined some of the basics. Now let’s break it down a bit more an talk about what actually has to be done to accomplish each task. First I want to say that if you really search and study you don’t need to pay for anyone to tell you how to do this business. It is helpful however to have a good Coach or Mentor to teach you the ropes. Sometimes you can find somebody who will help you at no charge. If you don’t know somebody who is involved in the industry and interested in giving free advice then you might look at paying for a coach but you should be very careful about any offers for this. Make sure that if you are paying anybody for such coaching that you know they are doing the business and making money with it. Anybody can regurgitate information. What you need is a true expert. I’ll do all I can to offer good details here start to finish but I do not offer any coaching on the topic at this time and in fact I have moved beyond note brokering, finding and even investing . I am writing this information purely to give some good info to those who are looking to understand the industry and to help you make a logical decision as to whether you want to work it.

With that, let’s get into those details. The first thing I listed was the need for organization of both space and time. If you do not treat this like a business from day one then you have already killed your business. You must dedicate real time to any business venture you start. If you want to make money at home you have to realize that you will sacrifice certain things. You must watch TV less, or spend less time on hobbies. You need to dedicate specific hours to the business tasks. You must accept that time spent with moving furniture around the office, fixing computer problems and other things that come up is not time spent on your business. The only time that counts is time actually spent on money making activities. While learning time is important, if it is not learned “on the job” then it is not technically time spent on the business. Accept this first and then start planning your time. Document it and keep track of it.

The next thing I detailed was learning the basics of the industry. Hopefully I will be able to provide you with enough basic information to help you understand what is involved. It is a simple industry really. It’s just a matter of setting up relationships. You need to network. You will need to step out of your comfort zone, be willing to talk to people you don’t know. Seek out people whom you don’t know currently and try to provide value to them. That is an important note. It is not about you. If you go about this “business” thinking only “what’s in it for me” then once again, you have already failed. Successful business owners are those who seek to find solutions for others and then provide those solutions, often without any expectation of a return. That is a concept I don’t have time to explain right now but if you can understand that part of life and business you will be way ahead of most.

Find investor groups, attend meetings, seminars and any such training resources you can find related to the industry. Unfortunately, you will attend some where you take little away because they were just a sales pitch but there are others that will allow you to actually learn what is needed. There are some legitimate teachers out there who will help you understand the industry and assist you to succeed. When you find somebody who is sincere follow closely and learn all you can. This is one of the benefits of networking and sometimes just like contacting your note holders, it is a numbers game. You might have to meet many people before you find one good mentor.

How you can make money as a broker

Many of you as stated before have been introduced to the industry on some level and you are curious perhaps to find out how you can make this a lucrative business for you. There are possibilities to make some good money as a Note Finder however the first thing that you must accept and understand is that you must treat it as a business. You will not make hundreds of thousands of dollars in your “spare time”. You will need to dedicate some real time and effort to this as a business. You will have to treat it like a business and just like any other business you will need to work it for years or at least many months (if you are aggressive) without pay. Let me repeat that. You will work the business for a long time without seeing any significant returns.


Running your own business is not like getting a job. If you got interested in this because you wanted to replace a lost job or quit your job and do this full time, be realistic and don’t cheat yourself. It can be done but it will not be done overnight. You will not begin receiving a “paycheck” just because you have put in a day’s work, week’s work or several months of work. You will only get paid when you learn to do things right and when you actually apply yourself in an effective manner with the proper and necessary tasks. So once again, the first thing to understand and accept is that this is your own business and not a part time hobby and not a “job”.


What it takes

Here are the basics of what is involved in this business. These are the steps in a “nut shell” if you will. Each of them has detailed tasks needed and each must be done consistently in order to be effective.

  1. Organize and schedule time
  2. Learn the basics of the industry
  3. Build a list of investors
  4. Locate and market to thousands of note holders
  5. Make contact and gather note details from note holders
  6. Present the note details to the investors
  7. Assist in communication to close the deal
  8. Collect your finder’s fee

Those are the basic steps. Now you need to understand that each of these steps has details involved to make it happen. One of the first things you need to understand about these details is that marketing in this industry is a numbers game. It will not happen overnight. You will not see money start flowing in with little to no effort. You will likely have to contact thousands of people before you close your first deal and then you will have to stay consistent with that marketing if you intend to make  a legitimate business out of it.

Cash Flow Notes Basics

Perhaps you have seen the infomercials on how you can make money brokering notes. Perhaps you have already invested in the system. If you are just wondering what the industry is all about or if you are trying to start it and not sure what is needed or how to go about doing it effectively you will find the insights and steps here FREE. That’s right. I will outline here the basics of what is needed to market this business absolutely free. I think there is a lot of confusion and misunderstanding about the industry and since I have been involved with it for years I feel I can clear some of that up for you.


Why I give this info free

I am providing this information free not so much to destroy the note info and sales industry as much as to help you become informed. It is a great industry with a lot of opportunity for those who treat it like a business but it is not “Easy”. It is like any business and will take work. I am writing the following pages to help those who are interested in the industry to understand what is truly involved. Hopefully you will pass the details along or bookmark these articles so others can gain from the information provided as well.

Cash flow Notes Basics

First let’s talk a little about what cash flow notes are, how they started and how you can make money with it. Then we will get into the details in other articles about what it really takes and the details of what it takes to make it a profitable business for you.

A cash flow note is an IOU. It is a promise to pay and there is generally some sort of contract written up that details those repayment terms. Such IOUs or “notes” have been created for thousands of years. Ever since man started transferring goods and services there has been some form of this industry. It is simply a promise to pay and then the terms of the repayment. What we generally see today and what you might be interested in is Private Mortgage (or trust Deed) Notes. These are notes secured by Real Estate or by real property. This is what a “note is and should give you an inkling of how you can make money with it.

The next thing you need to understand is the terminology for the industry so I will now discuss some of the common terms used and what they represent.

Note holder = Seller of the property and the person to whom payments are made.

Note Broker/Finder = Person who attempts to make money by finding the notes and pairing them with a relevant investor. note: there is no licensing in most states required for this position. The term “broker” is used loosely. This person is never brokering property and is not involved in the sale of the property. This person is also not Buying and selling securities and therefore does not need a securities license. There are of course always those in government who are trying to put more restrictions on the private note industry.


Note investor = Investor who actually buys the notes. This person makes their living by purchasing cash flows and receiving the payments from them. This can be an individual or large company. Different investors have different criteria and look for different types of notes and so it is important to have a Competent Note Finder who is well connected to assist.

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