BUSINESS FUNDAMENTALS
NOTES
Higher Yields GETTING CREATIVE WITH REAL ESTATE NOTES
byW. J. Mencarow W
HALF FORAHALF Offer the seller half the balance ($25,000) for half of the remaining 360 payments (the next 180 payments of $366.88). Put that into a financial calculator and you’ll find your yield is 15.98 percent. Be sure you get the next 180 payments.
hy do people buy notes secured by real estate? If you
making your yield 10.53 percent. Not bad! You can keep it or tweak it. Here are some examples of tweaking this note:
said, “for higher cashflow and less risk than most other investments,” go to the head of the class. Notes can earn high yields (aka interest), but what very few people know is that you can tweak notes for higher yields. Let’s say you find a $50,000 real estate note amortized over 360 months at eight percent with monthly payments of $366.88. You buy it for $40,000 (notes are bought at a discount),
BUYAT ONEYIELD, SELLATALOWER Sell the $50,000 note to an
investor for $45,000. The investor receives 9.15 percent yield, and you make $5,000. Or sell it for $58,000. The investor gets 6.51 percent, and you make $18,000.
QUARTER FORAQUARTER Offer the seller a quarter of the balance ($12,500) for a quarter of the remaining payments (90).
62 | think realty magazine :: may 2020
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