Here is an advanced technique that deserves revisiting. In my workshops I teach concepts, not merely methods. Once you learn the concepts, when the situation arises, you will be able to recognized an astonishing deal when you see it.

When the number of payments is small, a small discount will produce astronomical yields. Be sure to remember this. It will make you money. The Ten for Twelve Technique, or as I call it, The Perpetual Partial is a case in point. This technique is especially successful when the Note Seller needs relatively a small amount of money, and at the same time, does not desire a deep discount.

For simplicity, let's assume a note seller has a note paying $1,000 a month as an example. To be extremely conservative, let's further assume the property is worth only $50,000. The note seller is in dire need of $10,000 very quickly. (Notice I did not mention the amount of the note, nor the balance.) As a knowledgeable professional, you can use this scenario to your advantage. Why not offer the note seller to pay him/her $10,000 NOW, for the right to receive the next twelve payments. A little calculator practice is in order:

N = 12
I/Yr = ?
PV = -10,000
PMT = 1,000
FV = 0

What did you come up with as your yield? Did you get 35.07%? When you purchase ten payments for the right to receive twelve payments, your yield will always be 35.07%, no matter what the payment. This is the reason I did not mention the balance or interest rate. It makes no difference. Now you know why it is call the Ten for Twelve Technique.

Why do I call it The Perpetual Partial ? Because in the tenth month, I go to the note sellers and ask them, "Do you want to do it again?" Think about it. Which would you rather have: $1,000 a month for the next twelve months or TEN THOUSAND DOLLARS in your pocket NOW? For me, give me the ten grand. I don't care how much the yield to the Note Buyer.

But Tom, I don't have $10,000. What can I do? Easy, find an investor or family member who would love to enjoy a 9% yield to finance the entire deal. What would be the outcome? Let's look.

N = 12
I/Yr = 9
PV = -10,000
PMT = 874.51
FV = 0

Your investor/family member would receive 874.51 a month for a year. You would receive the remainder of $125.49; with no money out of your pocket. How many of these deals can you handle?

What happens if the note goes bad? Your position is as safe as any investment can get. You have $10,000 invested in a property worth a $50,000. (Most houses are worth a lot more than $50,000). I can think of no safer investment, can you?

I will be teaching this technique, along with other money in your pocket metnods in myAdvanced Note and Real Estate Techniques Workshop on Saturday, August 23 in Dallas, Texas. SIGN UP NOW to be assured a seat.

This technique is also taught in The Note Professor Notebook for those who are interested.

CONTACT ME if you have questions or comments. And remember, if you know of someone who has a note to sell, I DO PAY REFERRALS.

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

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One of my readers asked me to reflect on what has to be done to restore prosperity. Along the same lines, another reader commented that if the Republicans win the Senate, the House and the Presidency, they would turn everything around in short order. Sadly, voting one party out of office will do nothing to address the real reason the national economy, and indeed the world economy is in such chaos. What is the reason for the chaos? Both political parties have abandoned free market principles in favor collectivists' concepts and wealth redistribution.

While the Democrats acknowledge they believe in a collectivist economy, the Republicans will profess to embrace free market principles in their words, but then completely abandon the tenets of free markets in their policies.

What are the free market principles that have been rejected by both political parties? To begin, consumption cannot exceed production and production must precede consumption. Equally as important is the economic axiom that the laws of supply and demand do exist and cannot be ignored at the risk of creating economic chaos, as we are experiencing today.

To prove my point, look at the political statements of Republican politicians and candidates. For example, one Republican Senatorial candidate proudly decries all the job killing, costly federal regulations, then in the same breath professes that what we need is "smarter regulation". Of course, "smarter regulation" is never defined, but he would have us believe that regulations in general are good, we only have to create "smart" regulations.

This thought process is living in economic fantasy land. This candidate completely ignores the fact that even if regulations were created by all knowing, all caring individuals, regulations are both costly, and more importantly substitute the values of consumers and producers to the whims of politicians or bureaucrats.

We know that regulatory agencies are not comprised of all knowing, all caring individuals, but rather are supervised by political appointees with political agendas, and staffed by career bureaucrats, whose purpose is to perpetuate the bureaucracy. Bureaucracies consume. They DO NOT PRODUCE.

The main function of a government agency is not to protect the public, but rather to protect corporate industry from competition, as well as acting as a mechanism to disperse tax payers' funds. Without government agencies, there can no vehicle to redistribute wealth.

This Republican candidate reminds me of the socialists' argument in the 60s. When the Soviet Union, Cuba, and Red China were brought up as examples of socialism, their reply was "socialism is good; these examples just have the wrong leaders". Or as this Republican candidate put it, "Regulations are good. We just need smarter ones".

Another prominent Republican is touting his "Anti Poverty Program". In an end run to disguise its nature, this plan consists of transferring funds directly to the States. Of course, it is not called wealth redistribution, but rather an "Opportunity Grant". The politician relies on the ole stand by term of "reform" when touting his program. Call it any name you want, it is still wealth redistribution.

Nearly all politicians from both parties are presenting their government programs to "help the middle class". Of course by "helping", they mean more government programs that defy the laws of supply and demand, and have some form of wealth redistribution.

Notice how government regulations always need "reforming"? Ever wonder why? Simple, Regulations negatively affect the laws of supply and demand. Therefore, undesired consequences are often the result. Then the cycle of new reforms is to offset the negative effect of the old reforms; and so on, and so on. From a politician's point of view, regulations are good, but need "reforming" or "we need smarter regulations"

I could go on with example after example, but I think you get the gist. Republicans are no more free market advocates than are the Democrats. Electing Republicans will not solve our problems. We will still live under politicians who believe in collectivism and wealth redistribution.

The answer to our economic problems is to change the philosophical views of the public. Patronizing a Republican politician because he or she is not a Democrat will change nothing. The Democrats believe their brand of collectivism is good because "we care". The Republicans believe their brand of collectivism is good because "we have good intentions". No matter which party is elected the end result is a collectivist economy that is accepted as moral.

When wealth redistribution has been deem to be moral, all that is left is to vote to decide who is going to be plundered and who is to receive the plunder. When you hear candidates with their government solutions, ask yourself is he/she advocating free markets, or promoting a government program, and therefore some form of wealth redistribution.

If politicians are not advancing free market concepts, nothing will ever change.

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

Copyright © H&P Capital Investments LLC
All rights reserved

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