Posted by John Behle on November 02, 1998 at 17:40:48:
You would have to broker many notes to get enough seed capital to start investing. Most note brokers find it a challenge at first to put bread on the table, let alone in the bank.
The only real need for “only” brokering notes is to learn safely. Once you are comfortable with the process, then you can look at investor financing. If you haven’t already, check out the post by Ken below about the 600k portolio he put together in about 4 months. There were also upfront fees. Enough to live on comfortably.
You can make as much up front buying and holding a note as you can buying and selling. In fact, many times it is much more. The real profits come in with improving the portolio. It’s the same simple process used in real estate for many years. Few have ever applied it to paper, but it works very well.
Step one - Find and fund the note
Step two - Fix or improve the note (117 techniques)
Step three - Liquidate (refinance, trade, early payoff, etc.)
Let’s take Ken’s 600k portfolio and assume it is financed at 12%. If he starts working the notes and improving them his portfolio yield (WAC - Weighted Average Current Yield) may double at the minimum.
So now, he picks up 12% interest on 600k. Sound interesting? That’s how note investing moves someone towards a secure retirement income where brokering tends to just end up being a high paying job.
That’s why I say that you only need to look at brokering at the beginning as a way to minimize risk and earn while you learn. In the long run, there will always be notes outside your parameters that you will likely want to broker. They may be too big, specialized collateral, out of your area, etc. As your knowledge and financing capabilities grow, you can grab more and more of the stream of notes flowing across your desk.