In several articles, I have discussed how to buy part of the note to achieve astounding yields, while at the same time giving the note seller an immediate lump sum cash, with a small discount. Can you also achieve your high yield by purchasing part of the payments? You bet your sweet business calculator you can. Often by purchasing a portion of the payments, your offer will fit like hand and glove. Let's look at an example.

Ole, Nick and Nora Noteholder are again in need of $20,000 cash. (I think they go to Vegas frequently) They have a note with a $75,000 balance @ 10 % with 240 months remaining. The payments are $723.77 monthly. They have come to depend on these payments, and need half of the payments to make ends meet. You want to realize a yield of 18%. What can you offer them?

Try offering to buy half the payment amount for the number of months it would take you to realize your 18% yield. After you identify the variables, simply enter them in your calculator, and solve for N. It will look like this:

N = 118.62
I/Yr = 18
PV = -20,000
PMT = 361.88 (1/2 of the payment)
FV = 0

If we want to increase our yield a tad, we will round up to 119 or even 120 months. Lo and behold, everybody's problems are solved. You realize your 18% yield, the Noteholders will receive their $20,000 cash, as well as $361.89 a month for the next 120 months. (Go ahead, give them the extra penny) At the end of 120 months, they will again start receiving the original payments of $723.77, with a note balance of $54,768.23. At that point you and the Note holders can renegotiate if they want to sell, and you want to buy a portion, or any part of the note.

Conclusion: The Noteholders came out very well with this arrangement. First they received $20,000 cash, PLUS $361.89 for 120 months which equals $43,426.80. Added to the $20,000 cash, the Noteholders received a total of $63,426.80. But the icing on the cake is after 120 months the note reverts to them with a balance of $54,768.23 to either keep the payments or sell more of their note. Win/Win. This technique is described in more detail in The Note Professor Notebook, with a twist of making $4,000 using none of your own money.

This technique is especially popular with large notes on land or ranches where the note payments are high and the note seller can not only keep monthly income of $12,000 to $24,000 a year, but also receive a large up front immediate cash. If you have any of these, send them my way. I do pay referral fees.

As always, consult an attorney and CPA before dealing in notes or real estate. Try this technique, then contact The Note Professor and tell me how you came out. I love success stories.

If you have questions or comments, please CONTACT ME. Remember, I pay for referrals if you know of someone who has a note to sell.

Copyright © H&P Capital Investments LLC
All rights reserved
Tom Henderson
a.k.a. THE NOTE PROFESSOR

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.

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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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The minimum wage is again back in the news. It seems that politicians from both sides of the aisle completely ignore that the laws of supply and demand exist even for unskilled labor. Politicians also dismiss the axiom that price controls that are above or below market price creates shortages. In the case of unskilled labor, the shortage will be jobs. Unfortunately, Nature and reality will not ignore these economic laws no matter what pundits and politicians believe.

The defense that raising the minimum wage does not cause "widespread" unemployment is a frequently quoted study on raising the minimum wage on fast food workers. The conclusion was raising the minimum wage did not "substantially" increase unemployment. This study has been debunked both in its methodology and facts, but here I will address how the study errs on two important issues; economic axioms and history.

First the study's use of the phrase "widespread unemployment" did not result as a result of a small increase in the minimum wage is factual. However, what is omitted is the unemployment of non skilled labor that resulted from prior minimum wage laws, and increase in minimum wage laws to follow.

For example, say an employer can produce a product by either hiring three unskilled employees at $5 an hour or two skilled employees at $8 an hour. Of course the employer is going to hire the three unskilled workers at a cost of $15 rather than two skilled at a cost of $16.

Then in all its wisdom, our politicians decide to raise the minimum wage to $6 an hour. It will not take employers long to realize they can hire two workers for a cost of $16 rather than three workers at a cost on $18. The result is that one worker will be unemployed.

Does this raise in the minimum wage which results in only one worker loosing his/her job "substantially" increase the unemployment rate? Of course not. However, if we add other low income workers who were price out of the job market because of prior minimum wage laws we find there is a cumulative effect, which over time results in very high rate of unemployment for unskilled labor.

In other words, in the short run, the effect of raising the minimum wage does not result in widespread unemployment. However, over the years the cumulative effect of the minimum wage can be readily seen with high double digits unemployment in the minority communities and among younger and older workers.

Why? Because price controls cause shortages. It is the small mom and pop employers who cannot hire because the minimum wage prohibits the expense of hiring a young, unskilled worker. (As a side note that deserves mentioning is the defenders a minimum wage mandate which results in small increase in unemployment justify the unemployment increase by proclaiming these are "lousy" jobs anyway and will not be missed. The arrogance of this type of thinking gives insight into how collectivists think.)

Proponents of a minimum wage also ignore history; especially the Great Depression. The justification of raising the minimum wage is that higher wages means workers will spend more, and therefore grow the economy. This is the same false economic thought process that both Hoover and Roosevelt embraced during the Great Depression.

Hoover threatened business to keep wages high or he would enact laws that would control wages. Roosevelt enhanced Hoover's policy through the National Recovery Act, which regulated both prices and wages to be artificially high. The result was unemployment maintained double digits for over a decade.

The lesson to be learned is the government has the power to dictate prices of goods and labor, but it cannot force individuals to either buy or hire. Hence the Great Depression not only went deeper, but was also prolonged for over a decade. Why? Because the laws of supply and demand cannot be overruled by legislation, court decisions , executive orders or the misguided motives of "we care". Price controls cause shortages, and minimum wage laws are a form of price controls that harm the very people it is suppose to help. Why? Because the minimum wage laws contradicts free market principles. It is that simple.

Conclusion: Minimum wage laws are a form of price controls; and price controls cause shortages. While it is true that a small raise in the minimum wage will not result in widespread unemployment, when the minimum wage exceeds the market value jobs will be lost. For example, I remember when full service gas stations were the norm. You would not have to get out of your car to pump gas, and in fact, someone would pump the gas, clean your windshield, and check your tires and oil. This person was usually a teenager or low skilled worker who would also help the mechanic on duty to repair cars, change oil, etc. I remember young ushers seating us in theaters, sports events and musicals. Where did these jobs go? The rise of the mandatory minimum wage made these young workers unemployable long ago. At the time the same argument that a raise in the minimum wage would not cause "widespread" unemployment was being touted. However, over time more and more jobs are being eliminated because the cost of unskilled labor is artificially rising, which results in higher and higher unemployment, especially among young, minority workers. Raising the minimum wage to $10 will not cause "widespread" unemployment, but it will certainly price many workers out of the market place. Price controls cause shortages. It is that simple.

Food for thought: If unskilled workers should be guaranteed a "living wage", should an unskilled business owner be guaranteed a "living profit"?

If you have questions or comments, CONTACT ME Tom Henderson /a.k.a. THE NOTE PROFESSOR .

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All rights reserved