Posted by John Behle on April 26, 2000 at 19:40:32:
We’ve talked a lot about financing notes over on the cash flow forum so instead of typing a 50 page response, let me reference you there. I have gathered and archived the articles and posts related to funding notes over on my site. www.papergame.com - check under “Paper Posts”. You can find the same info here in the archives, but I saved everyone the trouble and did the search myself.
Yes, you can finance paper easily. I primarily use private investors but you can use institutions too (not the same ones that are buyers). You can do things through corporations or other entities to avoid the personal liability.
With notes as opposed to real estate they are going to look far more to the note as collateral and the credit of the payor. Private investors aren’t necessarily concerned about my or a company’s credit, but if you use an institution many will look to you for repayment - though I have had insitutions make non-recourse loans.
One nice thing is when you buy and finance notes you are usually picking up equity and cash flow that shows on your balance sheet. So, if I borrow 15k to buy a 20k note, my net worth increases as well as my monthly cash flow. Financing a lot of real estate lessons your ability to finance more. Paper has a different effect though it varies as to who is doing the financing. Then as you acrue a portfolio, you can go out for even cheaper financing.
Or… you use the notes to buy properties at a discount of 30-40% discount.