How do you sell half a note? - Posted by akachan

Posted by David P. Butler America’s Note Network on March 11, 2000 at 13:03:22:

Hello Akachan,

That’s a pretty tall order you have there! First, I think it should be pointed out that several of your questions would require someone having to at least give you a “mini-course” in order to provide you with more than the most cursory of answers.

And it appears that you are going this thing a little bit backwards - i.e. once you get out and do some deals, then you’ll be able to buy somebody’s course. But your questions indicate that you need a course of at least some kind before you even begin trying to do some deals!

The second problem is that the note industry itself is guilty of using a fallacious marketing technique, encouraging people to spend large sums on their various courses, with the unrealistic promise that you need no money to get started.

It is true that a guy can adopt what I call “guerilla” marketing techniques, and exchange shoe leather for cash dollars in an attempt to get started on a minimum budget. But in doing so, you are giving up hours, and incidental costs of some sort, and you need to have some source of steady income to survive while you are trying to launch this second business.

The reality is that trying to do business without marketing is like winking in the dark. You know what you are doing, but nobody else does! Ergo - how will you get the deals? And marketing costs money!

The second part of the equation then follows. How will you persuade people to do business with you, if you don’t know the business very well. You will need to have at least some knowledge to make it work for you even as a birddog (finder), who begins by bringing notes to an experienced broker, and earns referral fees until he is able to get up and running on his own.

Without some knowledge, you will have a hard time getting the note sellers to deal with you - moreover, you run the risk of wasting a lot of time on bad notes, because you don’t know enough to tell the difference.

Believe it or not, our industry is full of greenhorns who mistakenly believe that a note is a good note, simply because the seller is willing to sell it, and the seller is willing to let them work on it!!!

Fortunately, you have several low cost ways to get the knowledge you need to even get started. My favorite recommendation to beginners has always been Jimmy Napier’s “Invest In Debt”. It is an easy read, and it covers just about every basic a fellow needs to know before even considering jumping in the note business. For $17, it won’t break anybody.

Bill Broadbent’s “Owner Will Carry” is another excellent read that will give you some good insight into the more common economic and legal issues that are frequented in note dealing, and gives you with a little taste of the various forms that are often found in the business. Again, a low price to begin with at about $29 or so.

Another excellent primer for any note broker is George Coates “Smart Trust Investment In California”. Don’t let the title fool you… the material applies everywhere to a large degree. This book really covers a lot of practical and legal ground in depth, yet it
too is a fairly easy read, excellent material, and generally available for approx. $29.

He also has an excellent forms book with explanations and instructions that give terrific insight in to the paper shuffle involved in completing note transactions safely, and managing them after you have them. It goes for about $70 or so.

Also, Jon Richards has two nice little start up courses. The first is his “How To Start A Profitable Discounted Note Business” and it provides an excellent broad overview of the basics of note brokering. Again, an easy read, offering many valuable bits of information that, for only $65, can give you a real good idea as to whether this business is for you, before you spend an arm and a leg moving up to the next level.

Jon also has another course, “Calculator Power”, which I believe is a must read for anyone entertaining the note business as an occupation or investment vehicle. This business is numbers driven, and Jon’s easy to follow CP course provides an excellent grounding in the material you need to know. Only $49.

There are several others as well, but as you can see, purchasing any or all of these materials can get you out of the gate on firm footing without spending even $275. If you purchase one or two a month over the next few months, you will have given yourself an excellent “in home” seminar at a very low cost, and you’ll definitely feel a whole lot more confident in your abilities and direction.

I don’t remember how many of these titles are available right here on this site, but I am sure you can pick up at least one or two of them through CREO.

And if you haven’t done so, go through the many free “How To Articles” and “Money Ideas” information listed here on CREO. We also have a similar free library at America’s Note Network, which you can easily access through out banner above.

Once you get well grounded, you might consider going into John Behle’s “Paper Game”, or Jon Richard’s “Advanced Paper Course”. Both offer a lot of more advanced broker/investor techniques, marketing tips, and deal making skills, with Behle’s offering perhaps a broader scope of creative ideas for turning pig’s ears into silk purses.

Not too many folks successfully make the jump from kindergarten to their Bachelor degrees without taking a few steps in between. And given the costs involved, I have seen too many people jump into deep water before they really have learned how to swim.

This expense and lack of knowledge usually gets them in way over their heads, and they wind up drowning before they ever gave themselves a chance to get across the sea. The note business is a professional financing business, influenced by money markets, economics, and a wide variety of state and to some degree, federal laws.

To be successful at it requires various degrees of skills in dealing with people, negotiations, financial calculations, due diligence investigation, risk assessment, contract law, deal structuring, escrow functions, and marketing techniques. Not near as overwhelming as it sounds, but like any other profession, you need to have at least grasp of the basic mechanics before hanging out your shingle.

Go ahead and get your “dog-paddle” down first, and find out if you even like swimming before you go full bore into enlisting for the Navy Seals. I take
that back - maybe shooting for lifeguard duty on “Baywatch” would be a better goal to aim for ;-).

Hope this helps, and best of luck in your pursuit of the note business… it truly is one of the best little business opportunities in the world.

David P. Butler Vice President, Broker Relations

How do you sell half a note? - Posted by akachan

Posted by akachan on March 11, 2000 at 07:33:13:

What is the actual process of selling half a note? Is it handled through the bank? Or is it written on the note? I wish I could order your course, John. But I’m 20 years old and flat broke. Although if I make money doing this I’ll buy all your books just for all the free information you’ve given. I think I have a good grasp of what is going on here, but the details are numbing my brain. How would a 20 year old with no money or credit get started? Can this be done? Has anyone in a similar circumstance done it? Perhaps I could secure a note with my soul and buy it back at a discount later. I might even make a profit and become a better person! Ah yeah, one more question. John uses the example of buying notes at a 40% discount quite often. Is this a rarity or fairly common? Thanks.

Paper Funding Pitfalls - Posted by John Behle

Posted by John Behle on March 14, 2000 at 14:15:01:

I found the article and it hadn’t been published anywhere on the web. So, I am posting it over at my site. It is critical to read that in coordination with other articles and posts of mine related to working with private investors. Many people mis-understand how and when to work with private investors.

I do NOT recommend selling notes to naive private investors. Actually, as you read more, you will see that other than brokering a note or two for experience I do not advocate selling notes at all. You may always find notes outside your area or parameters that you will want to broker to institutions, that’s fine. Just know there are risks brokering to individuals.

Private investors are a great resource for BORROWING against notes WHEN you have the experience and skill to do it properly.

Re: How do you sell half a note? - Posted by John Behle

Posted by John Behle on March 14, 2000 at 13:31:03:

As to your first question - How to sell a half a note, there are several ways to go about it. When you are starting with little or none of your own funds, you have two options. One is to use one of the institutions that buy notes. If you do that, then how you structure the re-sale of half a note is totally up to them. They use a contractual method of doing “partials” that has some pros and cons - mostly cons. But…

They use their forms and formulas and if you want to play ball with them - then you use their ball. Never mind that they are trying to play basketball with a soccer ball. Golden rule - he who has the gold makes the rules. (See “Ways to structure a Partial” at my website).

The other approach to selling half or some other portion of a note is to use existing or cultivate new private investors. The challenge there is that you are new to the business without a track record or experience to show them. That isn’t going to fly with new or un-sophisticated private investors and there are definite risks in that department anyway (I have an article that addresses the risks of that, but can’t locate it at the moment).

That leaves you with the possibility of working with more sophisticated (have already done note deals) private investors.

I’d suggest as David mentioned that you back up just a little and take some time to read all of the information here and the archived posts at my website that address these issues - particularly finding and funding notes.

You’ll want to broker a few notes to start. Make sure you read some of my thoughts and discussions about that end of the business though. Don’t get caught in the “broke broker” trap. It is VERY competitive in the brokering end of the business and that is only one approach to the business. Sadly, many thousands have paid many thousands to learn to be a “bird dog”. The ones who succeed are the ones who either learn the other ends of the business or become super salesman marketers. Even then, most would make more at real estate, life insurance or some other form of sales.

The brokering business has become hard with the competition. The profits are nowhere near as high as those charging many thousands for their courses would have you believe. The students who start there generally only succeed if and when they realize they need more education and more tools.

Most of the successful people received their education elsewhere. It?s always interesting to see them end up as ?Master Brokers? or on someone else?s infomercial when they are my students. A few years back I looked at the list and at least 20% of the Master Brokers were my students that I could recognize. Others I find out about when they come up to me at a convention and tell me they received their start - or their kick start from my course.

The books that David mentioned are a good start. Much of the focus is on brokering notes. As I said, broker a few, but don?t limit yourself. Many seem to have the concept that my course is too advanced. I?d just like to clarify that.

The 5 day video course covers the full spectrum. The more advanced concepts are what excite many and that is what they talk about, so some get the idea that that is only what it is about. The course covers 14 videos of 28 hours of classroom instruction of a live 5 day training. It begins with ?what is a note? and builds from the basics to advanced techniques. With 5 days and over 500 pages of manuals it covers paper from beginning to end like no other course.

A couple examples. John and Lisa Moren took the course when they first entered the business. A couple years ago after almost a decade in the business they made a statement to Larry Pino that after 8 years in the business the industry had still not caught up to the advanced principles I taught them 8 years previous.

One of my franchisees was really hyped before a Noteworthy convention a few years back about the advanced course taught by Howard Cook. He was told it would ?blow his mind? and that Howard was the brightest, most creative mind in the industry. Wayne fell asleep. He said it was all quite basic after what he had learned from my course.

I could easily charge thousands for the course, but I don?t. At $395, it isn?t a whole lot more than all the books that were recommended and would teach you a great deal more. If you chose to go that route, I am also having a live 5 day course in Park City in July and would throw that in for you free of charge. If you?re serious about this industry and it?s potential, then I?m serious about seeing you succeed and there?s no better place to start.

Don?t get me wrong with what I say about brokering notes and the current approach many are taking in the industry. There?s money there, but there is 10-100 times the profits in investing in notes. I many times make more in one deal than the top brokers make in a year?s hard work.

The past is our future. I?m grateful I started into notes almost 24 years ago. At that time there wasn?t much of an institutional or brokering end. I learned to invest on my own and was neither dependent or ?sold on? that end of the industry. I?m not dependent on it and no one needs to be. What worked then out of necessity works today out of choice. It is also the best option for someone?s future survival in the industry.

Ok, I?ve rambled enough. It?s a great industry if you can get past the hype and mis-conceptions that are rampant out there. I love the creativity and profit potential of the industry and the current status of the brokering industry is just fun to me. These are people that bring me deals, not ones that take them from me. It?s all in how you look at things and position yourself to take advantage of the opportunities.