On deals like you mentioned above…small notes secured by seconds, or thirds on their property what all is involved time and cost wise to accomplish this?
I wouldn’t think there’s room in the profit for doing an appraisal, or having title insurance.
I ask because having worked in the Contractor Sales department of a Building Supplier I just happen to know many builders, roofers, etc. and have often thought of approaching them to finance some deals. Knowing that the builders have charge accounts to float the cost of materials a way of financing may be able to be worked where they would release the note with some funds now and some later. This would be a way to increase yields, at least on paper.
My concern is what you can do with a handful of these small notes. Would there be a market to get a loan against them? Would small notes be saleable?
Back when I was doing some construction work I know I could have easily more than doubled my business if I would have had access to someone to finance my customers. I was doing small 2k jobs. Financing would have opened the door to major projects. I think this is something worth pursuing… I just don’t know how to work out the details so everyone is protected.
Thanks for all the info! (PS:Just got the video tape series Saturday. Haven’t seen the tapes yet, kids are out of school, but I’ve already been thru 3 of the books! Great info…got my motivation running in overdrive!)
Posted by John Behle on June 17, 1999 at 20:22:46:
Just wanted to share some of the fun smaller deals we’re doing. Sometimes I throw out some extremely large profits on bank deals, foreclosures, etc. We also do some smaller ones. It’s a way to keep the cash flow that comes in going back out at high yields. Here’s how a few of the smaller deals look.
We’re doing a number of cookie cutter type deals with a training company. They sell their program for $1400 in three stages (400/600/400). If people need financing, we look at each deal individually. Sometimes we can refinance them and do a debt consoldiation loan when they have real estate. Other times we can just place a small second or third against the property. With proper credit and a “replacement guarantee” from the company, we will do unsecured loans.
Here’s the terms. The package is either $1400 for all three levels or $1000 if they have already been through one level and are moving on.
We generally charge 15% with 12 monthly payments. In some cases we go with a weekly payment.
On the $1400 package, we pay $1200 by pre-paying, but they pay us back the full amount. On the $1000 package, we pay $900. The payment on the 1400 package is $126.36 and the 1000 package is $90.26.
The discount drives my yield to 45.56% and 35.65% respectively on the two programs. That doesn’t include the enhanced yield from early payoffs, refinancing fees (points), etc.
Why I said Y2K yield enhancement in the title is what we are doing with “food storage” companies. Their sales are going wild right now. People are stocking up for the Y2K crisis. We buy some of their paper and secure it by real estate. Sometimes we take the deals that Beneficial or another finance company won’t touch because of a glitch on the credit. Yet, the people may have substantial equity in a property. Unsecured consumer finance yields - yet with real estate as collateral. Sweet.