Buying Seller financed Notes

So far we've covered what you will need to get started,
some of the pros and cons of notes, and some of the basics of
finding them and marketing your business.

I hope you studied your homework assignments. Doing the
homework will help you learn more, and faster, too. If not, you
still have a chance to do so. I suggested that you read
'Dale Ketcham: Buying Notes Since 1970' and 'Your Marketing Toolbox'
parts I, II and III. They are in the 'Finding Notes' area
at http://www.cashflows.org

Now you're prepared to learn the closely-guarded secret
of how to make money in notes safely. Here it is:

Don't buy any.

I hope that didn't fly by you too fast. If so, I'll repeat
it. Don't buy any notes. That will keep you out of trouble. Yes,
there's more to it, but that's the key. Now that you know what NOT
to do, let me tell you what TO do. The system you'll follow is
straightforward and simple. You'll make money without spending
any of your own. Like it so far?

Most systems of instruction cost money, but this one pays
you to learn. It operates on the principle that there are people
in the world who have a lot they could teach you about notes,
because buying and selling them is their business. These people
need something you can provide: more notes. The more notes you can
supply to them, the more experience you'll get and the more you'll
learn, through observation and through hands-on practice.

The ABC System To (Almost) Risk-Free Note Investing and Note
Brokering

If you simply follow my ABC System, you can make money from
paper with very little risk:

ADVERTISE for paper anywhere and everywhere you can. This includes
networking. We covered this topic in Lesson II.

BE organized when people respond. Have THE PAPER SOURCE Mortgage
Worksheet by your phone, and ask for the information you need to
complete the Worksheet. Thank the caller and tell them you'll
analyze the information and call them back shortly.
(This and many other forms are at http://www.cashflows.org )

CONTACT a professional note investment firm. Fax them your worksheet
and any other paperwork on the note you have. If the note meets
their criteria (which you should know before you fax them) they will
quote you a price and expect you to negotiate with the seller.
You make your money by negotiating a price somewhat lower than what
the investor has quoted. You will also be expected to know what
documents the investor needs, gather all of them into a professional
package and overnight them to the investor ASAP.

At the beginning, work with "institutional investors."
These are the professional note investment firms, the big national
companies that buy notes. PAPER SOURCE JOURNAL subscribers will
find them in the PAPER SOURCE REGISTRY OF NOTE INVESTORS
(http://papersourceonline.com/registry-of-investors/how-to-get-in/)

This is the simplest way to start. As soon as you can, I
want you to do it differently, because you'll close far more deals,
but this will get you started. Using the ABC System, you avoid
liability, use none of your own money, make profits and learn from
a professional paper buyer. Only when you've done this over and
over and over again and know exactly how the professionals work
are you ready to buy a note for your own portfolio. You'll be so
thankful you waited: your yield will be high (because you'll know
what you're doing), your investment will be blue ribbon category,
and you'll be able to buy lots of good notes with all that money
you've made! After you've done that for awhile, you may even want
to branch out into fixing up "bad" notes, which can be a very
profitable specialty.

You'll still be selling almost everything you find to
investors. But occasionally your highly-trained sensors will zero
in on a super deal that you'll want for your very own.

Using the ABC System, you never use any of your own money
(except to find the notes, of course) and you never actually own a
note, so if something goes wrong, you haven't lost any money. The
professional reviews the note with you, tells you its strengths
and weaknesses, orders and pays for the title search, appraisal
and credit check and handles all the details. You work with the
professional, ask questions, review the paperwork with him and
learn: And make money in the process! Every time you do this,
you'll learn more and more about notes. Eventually you'll know
enough to safely buy a note on your own once in a while. Even if
the pro doesn't want some of the notes you bring him, you'll still
learn, because he'll (hopefully) tell you why they're not good
notes.

A couple of caveats: Don't waste the investor's time by
faxing unmarketable notes. The home study course I recommend and
your own experience will train you to spot such notes in 30
seconds or less.

Make sure you are working with a "real deal." That means
you have direct contact with a motivated note holder. It means you
do not waste your or the investor's time with notes you found through
other brokers or through court records or other methods without
contacting the note holder to see if they want to sell. DON'T GET
CAUGHT IN BROKER "DAISY CHAINS"! (Buying a note from a broker who
bought the note from another broker who bought from still another
broker, etc., etc.). That's a tried-and-true formula for failure.
Deal with only note OWNERS.

Please don't fax the same note to a bunch of investors.
Make it your business to know what kinds of notes different
investors want and only give them those. You'll soon know who
gives the best quotes for what notes. In fact, the sign of an
experienced note broker is that he or she has the note under
contract before ever contacting an investor.

You can't start this system without some preparation.
I attended a "free seminar" for the cash flow business
at a local hotel. They were trying to get you to sign up for an
expensive seminar, and I've heard that if you go to that, they try
to sell you more expensive stuff. Anyway, the speaker/salesman at
this "seminar" said that all you have to do is to "find somebody who
needs money. Anybody here know anybody who needs money?"

Sure, most people need money, but the question should be,
"How many of you know somebody who needs money -- and has a
marketable note -- and wants to sell it -- and is willing to
discount it?" Of course, that makes it sound harder. Actually,
it makes it sound closer to the truth. But the truth doesn't sell
expensive seminars.

According to him, the cash flow business consists of
finding somebody who needs money, and of course they happen to
have a marketable note they're willing to sell at a discount,
you fill out a brief worksheet, fax it to an investor and wait
for your money. The whole process, once you've done a few,
should take "a couple of hours."

Oh, you have to spend several thousand dollars taking his
seminar first (if it's so easy, why do you need the seminar?).

That's worse than slick salesmanship. It's an outright
lie. There is a lot more to the business.

You should at least know the basics of note investing
before you talk with an investor about notes you want him to buy. Why?
First, you must be able to screen the notes and reject the poor ones.
If you repeatedly call an investor with unmarketable notes, you are
wasting their time and yours and eventually they'll ignore you.

The second reason I want you well-grounded in notes is that
if you know what you're doing, usually you can suggest alternative
ways of buying a note to the note seller and/or the investor:
methods they (and your broker competition) may not have thought of.
You can often save a deal this way and make everyone happy.