Let's review a little. What do we mean when we talk of "partials"? A partial merely means instead of buying or selling all of a note, we sell or buy a portion of the note. For example, in THE NOTE PROFESSOR NOTEBOOK, I discussed how rehabbers are eaten alive by high interest payments. In this market the only buyers available have mediocre credit and a low down payment. How many have been in this situation? One solution to this problem is for rehabbers to sell their property using seller financing, and to take back a wrap note. After seasoning, rehabbers could then sell a portion of the wrap note to pay off the underlying hard money lender. The rehabbers' profit would be the back end, or "tail" of the note. I call this technique the REHABBER BAIL OUT.

Another beneficial scenario of selling a partial, or portion of a note, would be someone who has a $100K note, and needs only $20K cash, but does not want to take a deep discount by selling the entire note. The note seller could sell enough monthly payments to receive $20K, while having the note revert to the note seller in the future. This is a WIN/WIN for both the Note Buyer and note seller. This scenario happens all the time. Remember---THE MORE DOWN PAYMENT, THE MORE MONEY IN YOUR POCKET.

In the PARTIAL TO PARTIALS lesson in the NOTE PROFESSOR NOTEBOOK, I illustrated a simple way for note sellers to get their money, while at the same time allowing the Note Buyers to achieve their yield. All walk away happy campers.

However, in other lessons like How To Double Your Yield with Half and Half and FOR THE GREEDY ONLY, I show how you can easily be deceived into thinking you are getting 100% for your note, or be convinced there is no, or little discount. Here is the main point I want you to get out of this issue---NO NOTE BUYER PAYS 100% FOR A NOTE. But there are those Note Buyers who will try to deceive you into thinking you are getting 100% for your note.

Anytime a Note Buyer advertises 100% for your note, you can rest assured there is some sort of split payment or partial involved.

Let' take a quick look at the example in Double Your Yield With Half and Half where a note seller has a note balance of $85,562.87 being paid off at $660.39 monthly for 300 months @ 8%. The Note Buyer wants 16% yield. If you bought the entire note, you would pay $48,597.61. OUCH!!!!! Deep discount.

Most note sellers would not take this deep discount. Here is one way some Note Buyers will present their offer to infer there is no discount. They will say, "I will give you 100% for your note, 50% now, and 50% in 150 months. Sounds like there is no discount, right---wrong.

For those following on the calculator, what is the Note Buyers yield? In the first example where the note buyer is buying 50% of the note for 50% of the payments, what is your yield if you is receive $660.39 for 150 months, and paid $42, 781.44 for the note?---bingo----15.98%. So if you multiply $42,781.44 times two, this equals $85,562.87. By this math the note seller will receive the full amount of his/her note, right? Not so fast!

A little calculator practice is appropriate. Here is where the sleight of hand comes in, and the discount becomes very noticeable. What is the PV of a note paying $660.39 for 150 months at 8%. Did you get $62,495.78? Subtract $$42,781.44 from this figure. WOW!!! This is a $19,714.34 discount. This is far removed from the 100% figure touted by a Note Buyer.

For The Greedy Only, the sleight of hand is even more hidden. It also takes advantage of the complexities of the time value of money to deceive sellers into thinking there is no discount. But this one is more subtle. I will go into more detail on this one in future issue.

Does this mean that if you sell a partial of your note, you are getting ripped off? HEAVENS NO! Partials are a lucrative way of receiving a lump sum cash without a deep discount.

In HAPPY TAILS TO YOU, I show you how you can get free notes for your retirement, using partials. When I sell my notes, I will always ask first, how much will the buyer pay for a portion of the note, instead of the entire note. There are many instances where I can sell ½ of my note for practically the same price as the whole note. But Professor, how can this be? It is just the wonders of the compound interest and the time value of money. It is all discussed in detail in THE NOTE PROFESSOR NOTEBOOK.

CONCLUSION: Partials can be a very profitable avenue for selling your note. However, just be aware you are not getting 100% for your note and there is a discount. By being educated, you will know not only how to sell a partial, but also how it benefits you.

Please contact me with your questions or comments. I will get back to you, I promise. Take care, Tom Henderson a.k.a. THE NOTE PROFRESSOR

If you want to purchase a note or have a note you want to convert to cash, contact me for professional pricing.

Copyright © H&P Capital Investments LLC All rights reserved

If you have not attended a Note Professor "How To Get Rich with Notes" class, be sure and purchase the Note Professor Note Book manual to enhance your knowledge of creative real estate financing and note buying and selling.

"I got your news letter. It was great, purchased your (Notebook) and it was awesome. I used your renter technique and it worked also. I am getting 41% return thanks to your expert advice. I have spent hundreds and not able to do any thing thru other gurus" Gary W. Garland, TX

"It blew me away what a powerful tool notes can be. Lots of great information, worth every penny! Highly recommended."
Jeff C. The Colony/Investor

"Your manual is short and straight to the point, it's rare to buy something today that gives you your money's worth. Thank you" Stephan B. Phoenix, AZ

You will learn at least one new usable concept to increase your profit in buying or selling notes and real estate.
Tom Henderson, author

By popular demand, THE NOTE PROFESSOR NOTEBOOK is now available in easy, downloadable E- book form for a the low, affordable price of $39.95. Other products are also available, including HOW TO MAKE OBSCENE PROFITS with SMALL MONEY, and GUIDE FOR SECOND LIENS. There is also a FREE download of CHECK LIST FOR OWNER FINANCING. Simply go to the NOTE BUYERS STORE. I can think of nowhere that you can find such information packed products at such incredibly low prices. We are still working out the bugs, so if you have any problems, be sure to contact me.

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Thanksgiving is upon us again. I think it appropriate we revisit last year's article on THE REAL FIRST THANKSGIVING. The lesson learned is as true today as it was back then.

A valuable lesson in economic systems can be learned from the First Thanksgiving. For the most part, we are taught the Pilgrims landed in America in 1620, and had a harsh winter. However, with the help of the Indians teaching the colonists how to plant corn, in 1621 the colonist had a plentiful harvest, where the colonists invited the Indians for a feast to show their gratitude.

Not quite true. While there was a feast in 1621, the feast was to "celebrate" only a successful hunting party, not a plentiful harvest. In fact for the next couple of years, the colonists almost starved to death. How could this be in a land so rich in natural resources? A look at the economic system employed by the colonists will give us the answer.

Governor William Bradford, the leader of the colonists, describes in detail in his book "Of Plymouth Plantation" how the collectivist economic system the colonists adapted was disastrous. Because of religious reasons, the Mayflower Compact set up a system of socialism as a way to organize production and distribution of goods. It just seemed like the "Godly" thing to do was to take all the production from hunting, fishing and planting and place it in a pool; then "share and share alike". That is exactly what they did. The outcome was not pleasant. Instead of harmony, the results were harsh words, anger, and resentment when producers could not enjoy the fruits of their labor.

From "Of Plymouth Plantation":

" --the young men--did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong --had not more in division--than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes, etc-- thought it some indignity and disrespect unto them. And the men's wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it."

More importantly, because no one wanted to be forced to work for the benefit of others, little work was done. The colonists almost starved. William Bradford reported that the colonists went hungry for years, because they refused to work in the fields. They preferred instead to steal food. He says the colony was riddled with "corruption," and with "confusion and discontent." The crops were small because "much was stolen both by night and day, before it became scarce eatable."

Although he did not know socialism from capitalism, Governor Bradford saw the system of "from each according to his ability, to each according to his needs" was not working. In the spring of 1623, Bradford changed the system. A plot of land was given to each family. However, unlike the prior set up, this time what was produced on the land was the family's to keep. Any excess could be traded as the families saw fit. The same went for hunting and fishing. What were the results?

From "Of Plymouth Plantation"

"instead of famine now God gave them plenty,"--"and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God."

This is another example of how free market produce abundance, while collectivism results in starvation.

Governor Bradford further comments about the results of his change in economic systems; "any general want or famine hath not been amongst them since to this day." As a side note, in 1624 so much food was produced that the colonists started exporting corn.

So when you are with your family giving thanks for your loved ones, and enjoying the beginning of the holiday season, take time to remember also that the reason we are celebrating this as a holiday instead of a tragedy, was a change from a socialistic economic system to a free market system. Another example of free markets working, while collectivism fails.

HAPPY THANKSGIVING

If you have questions or comments, please contact me. It is from your input that I get my topics.

Remember, if you know of someone who has a note to sell, I will pay a referral fee, or split my profits with you

Tom Henderson /a.k.a. THE NOTE PROFESSOR .

Copyright © H&P Capital Investments LLC
All rights reserved