Often if you find a motivated seller, you can arrange to create a note against other property you own and use this note for the down payment, or perhaps even for the entire amount of the purchase price. For example, if you own several rent houses with equity, you can create a note against one, or maybe all (a blanket mortgage) and offer this note as a down payment, or the entire purchase price for a larger property. With built in discount clauses, when you refinance or sell the property, you will put even more money in your pocket. Here is what a typical deal would look like.

Walt and Wendy Wannasell have a house they inherited that is in worse than terrible condition. You know that once rehabbed, you could sell the house for a handsome profit. The properties in the neighborhood are going for around $140,000. You can pick this property up for $50,000. Your problem is that you have no money at this time, but do have a couple of rent houses with $25,000 equity each. What can you offer?

Several techniques can be used in this scenario. First, you could create a $50,000 note against both of your rent houses for the entire purchase price. Would you add in built in discounts? You bet your sweet trust deed, you will. When you rehab and sell the property, the $50,000 note against your rent houses will be removed.

Another successful method is to create a note against one or both of your houses for $25,000 as the down payment, and have ole Walt and Wendy carry back a note for $25,000. If Walt and Wendy are reluctant to take all paper, since you plan to rehab the property and sell it, you might even put a two year balloon on the note they are carrying back. Then try to get a discount if paid off earlier. Always try for a built in discount.

Often when the sellers see that you are putting something up at risk (one or more of your rent houses), they will be more receptive to all paper deals. Expert investors use this technique frequently.

Creating Notes on property you own is a very powerful way of using your equity without refinancing. Refinancing? I did not mention that method. Or did I just mention it?

As always, consult a CPA or attorney before doing any real estate or paper deals.
Try this technique, then contact
The Professor and tell him how you did. I love success stories.

This is only one technique which will be taught in Tom's and Gaylene's CREATING WEALTH WITHOUT BANKS workshop. Sign up early to assure a seat and take advantage of early registration discount.



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The pundits and "make believe" economists are coming out in droves with half truths, false assumptions, distortions and out right falsehoods to try to convince us a new "stimulus" package is needed.

I read an article written by the New York Times' Paul Krugman, spouting how government spending in the Great Depression resulted in unemployment decreasing from 25% to 14% by 1937. Of course, he "conveniently" left out how many of FDRs economic programs were declared unconstitutional, which unleashed the chains FDR had on market forces. We discussed this specific distortion in last month's issue of THE NOTE PROFESSOR NEWSLETTER.

However, this is by no means the end of his exaggerations. Next Krugman suggests that since WWII was financed by government spending, and unemployment decreased as a result of the military's absorbing approximately 20% of the work force; therefore government spending brought us out of the Depression. Jeez. This example of "economic logic" is so ridiculous, I hesitate to even address it, except I heard the same logic by one of the political pundits on a news channel. It seems this is another talking point.

That being the case, let's analyze the "logic" that government spending on wars creates prosperity. This "snake oil" reasoning is rooted in two major fallacies. First it equates a decline in unemployment due to "hiring" 20% of the work force in the military, to an increase in living standards. A decline in unemployment is not the same as an increase in living standards. If this were the case, I have a solution for all recessions and unemployment. Take 20% of the nations workforce and put them on the government payroll. Of course they would have to be fed and clothed, so look at the jobs this alone would create, right? Let's not leave out furnishing all these government employees with weapons and ammunition as we did our military. Everyday they would be flown to a target range shoot up all their ammo, which would have to be replenished on a daily basis. According to Krugman's logic, this would create jobs; and therefore prosperity.

Next build a huge city in the desert. Then build bombers, bombs and other explosives, and blow up the city. After the city is bombed, take the airplanes to the same site, and blow them up. At the same time, build battle ships, carriers, cruisers, submarines etc, and take them out to sea and blow them up. Then repeat the process. This is what happens in a war economy. According to Krugman, PRESTO, we are out of the recession, and have continuous prosperity, because all the jobs that were created through government spending. Sounds ridiculous, doesn't it? The reason it sounds ridiculous is because IT IS RIDICULOUS.

The second fallacy of Krugman's "logic" is that he conveniently omits what could have been produced if we were not at war. When the ships, planes, bombs, rifles, jeeps, ammunition etc. were being produced, everything from toasters to gasoline were in short supply because most production went into the war effort.

For example, back home the civilians were experiencing gas and food rationing, meatless Tuesdays, having to grow their own vegetables in their backyards, giving up personal belongings made of metal or rubber for the war effort. Everything from eggs, milk, shoes, clothing, jewelry, appliances, cars, sugar, coffee, to silk stockings were in short supply. Living conditions were not "improved" by WWII. Is there any difference in there being a shortage because of a depression, and a shortage because of a war? Nope.

Last, but not least, in Krugman's assertion that WWII brought us prosperity is the cost in human lives and suffering. Remember, prosperity and improvement in the standard of living is not the same as a decline in the unemployment rate. While it is true government spending in financing the military did eliminate the unemployment problem, it did not raise the standard of living. In the United States alone the hundreds of thousands who were killed or wounded is not my idea of prosperity. Ask the Marines who crawled in the mosquito infected jungles of island after island if their standard of living improved. Convince the soldiers who invaded North Africa and Europe and had to endure sleeping in tents in the heat of the dessert and freezing cold of the winter if their standard of living improved. Or the sailors and airmen who experienced the hardships of war if their living conditions improved. This does not even include the individuals who were torn from their families and the hardships that both those who went to war, and those who remained home had to endure, not only during the war, but the scars that remained long after the war was over. The point being that catastrophes, especially wars, do not produce prosperity. Whoever makes this assertion should be considered ignorant, at best, and at worst, not reputable. Remember, there is a difference between low unemployment and prosperity. I think we have shown how unemployment improved during WWII, but this did not translate into prosperity.

Our economy started "recovering" from the Great Depression because when WWII ended, many of the government programs also terminated. This is a subject for another article.

With that being said, I am just heard another phrase to justify another "stimulus": "Recession Economics". This is another jewel that is riddled with false premises. I will discuss it in the next issue.

Summary: Governments produce nothing. Taking money from productive hands for politicians to spend as they deem necessary is a form of consuming without producing. Government spending on wars magnifies this axiom. Why? Because wars destroy things, including lives. Destruction and prosperity are not compatible.

CONTACT ME.
If you have questions or comments. I look forward to hearing from you.



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