Posted by John Behle on March 23, 1999 at 17:08:29:
I don’t sleep much either. I wish it were because of creative ideas about paper. Instead it is a baby that thinks sleep is only good for daytime.
As to your question - don’t make up the note seller’s mind for them. As you mention, putting in the balloon makes the note more valuable, but your seller may have different needs. A partial on an amortized note may be what “jump starts their Greed Glands”. I like to get in and structure the note to best meet their needs and desires. It also builds repoir. They know I am focused on solving their problem. It works well.
My mind is a veritable torrent of thoughts about paper.
Thanks John, I can no longer sleep
OK, assuming we call the FSBO’s in the paper (especially those that say, “Owner will Carry”), what do we feel is the best strategy?
Do we say to them, “Put a balloon in the note, I can buy it for more money that way” - or do I not mention it, and hope he amortizes it, that way the discount is bigger, leading to more potential profits?
I’m kind of leaning towards former, because I can offer more money for it. The discount will still be be pretty big, although it probably would be tougher to improve the note.
For instance, a 20K note for 360 months with a 5 year balloon at an 18% discount is worth $3200 more than the same note with a full amortization (14.8K vs 11.6K).
