Make Money by Over Paying and Under Selling
From Page 21 of The Note Professor Notebook.

Did this get your attention? If I had made the title "Buy at Wholesale and Trade at Retail" would you have been as interested? Probably not; but this is exactly what we are talking about. This technique transpires frequently by experienced investors. Here is my story, but it is the concept that I want you to learn, not the specifics.

I found a house where the owners inherited a single family residence and lived out of the city. The property was in a lower/middle economic neighborhood and the owners would become ill when the address of their property was even mentioned. At that time, the house was worth $40,000, and the owners had agreed to carry back financing. Everybody who had made an offer had low balled them on price. Even though they were eager to sell, they were also reluctant to take a price that was substantially low.

I made them an offer over their asking price, with 0 down. All they would have to do is accept a note I had, which had better collateral than their house. My note was for $43,000. After I showed them the appraisal of the house that was security for my note, which was in the $60,000 price range, they were more than happy to accept my note. I even guaranteed the note. Why would I do that? It was to my benefit, that's why. There are several ways to guarantee a note. That is another lesson, watch for it.

Are you beginning to see what I am doing? Why would I trade a $43,000 note for a $40,000 house? Besides being able to trade a note at face value in on real estate (that is a great technique itself, it was thrown in here as a freebie), I paid only $25,000 for the note. I now have a $40,000 free and clear house for which I paid only $25,000 .

I rented it out for about a year, and then, all of a sudden I was in need of cash. (Ever been in that position?) This was at a time when investor refi's were out of the question.

The house had appreciated to about $44,000. I found a quick buyer for $38,000 cash NOW. So by higher mathematics, I paid $25,000 for the note, traded the note for the house, and sold the house for $38,000. That is a $13,000 profit for overpaying for a house and then selling it for less than I paid for it. To add gravy to this deal, I also enjoyed monthly rental cash flow for a year.

As I mentioned earlier, this is a great technique for those of you who have taken back notes. It is MAGNIFICANT for those who purchased notes at wholesale, or a discount.

Offer to trade the notes in at face value for property, and see what happens. If an owner is willing to carry back a note from the beginning, it often is not a difficult task to trade your note for the same real estate or for any other personal property for that matter, such as cars, boats, planes or even swimming pools. That is another lesson, look for it.

To prevent a taxable event for both the seller and me, I actually created a note that was secured against the note I had purchased. I even had some substitution of collateral clauses in the contract where I could have moved the note around.

What are substitution of collateral clauses? That, too, another topic; look for it. I still do not get an "A" for this deal. Why? Because I did not get built in discounts if I paid my note back early. The note I had purchased was paid off a couple of years later. If I had built in discounts in my note to the sellers, I could have pocketed another couple of grand.

As always, CONSULT an ATTORNEY and CPA before trying any of these techniques, or doing any real estate or note deals. Try this technique out. Contact the Professor and tell me how it worked. I love success stories

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.

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.

This new election cycle is the perfect opportunity to evaluate if our politicians from all political parties embrace the concept of free markets and individual liberty or promote the tenets of collectivism and wealth redistribution.

As case in point is the Republican, Chris Christie, promoting the idea that Social Security, here after referred to as SS, should have a means test, as well as raising the age one is eligible to receive Social Security.

TRANSLATION: SOCIAL SECURITY IS BROKE.

Christie correctly points out that SS being bankrupted is a problem that neither party wants to address. However, he then goes into somewhat of the age old deception by calling Social Security "insurance" against poverty in our old age.

Remember when Social Security was called Old Age Survivors and Disability Insurance and that our payments into the system were called "contributions"?

However, in the Fleming vs Nestor ruling, the Supreme Court accurately held that Social Security was NOT insurance, nor an entitlement.

The Court ruled: "To engraft upon the Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands. It is apparent that the non-contractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments."

In other words, SS is not a right, nor insurance, but merely another government program to be administered at the whim of politicians.

The fact that Social Security is nothing more than a wealth redistribution program is reinforced in another Supreme Court case, Helvering v. Davis when it ruled, "The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way."

Do you comprehend the meaning of this ruling? The Court characterizes that rather than SS "contributions" being set aside for personal retirement, it is actually a payroll tax that goes into the general fund, and more importantly, NOT EARMARKED FOR ANYTHING. This is another way of saying that politicians will tax your earnings, then redistribute your taxes in any manner they deem appropriate.

At the same time, without realizing it, Christie exposed the true nature of SS when he commented, "do we really believe that the wealthiest Americans need to take from younger, hard working Americans to receive what, for most of them, is a modest monthly social security check?" In other words, SS is not financed by individuals paying into personal plan over the years to be utilized at retirement, but rather SS is financed by younger workers paying for the benefits of the retired. Is this not a form of wealth redistribution? And like all wealth redistribution programs, it cannot be sustained as we are now discovering. Remember, CONSUMPTION CANNOT EXCEED PRODUCTION.

I give credit to Christie for again bringing the Social Security and Medicare system to the limelight. What I object to is Christie's solution to the problem, when he states, "I propose a modest means test that only affects those with non-Social Security income of over $80,000 per year, and phases out Social Security payments entirely for those that have $200,000 a year of other income. We should apply the same concept to Medicare."

Christie says it better another way: - if you can afford to pay more for your health benefits you will and if you can't, you won't.

TRANSLATION: From Those According to Their Ability; To Those According to Their Needs.

Christie goes on to say that SS retirement age should be raised to 69, (Why not raise it to 90. If most people die before they collect, SS would be solvent in no time) but this is not really the point. The solvency of Social Security and Medicare is a problem that needs to be addressed. However, rather than identifying the root cause of the problem, mainly that Social Security and Medicare are wealth redistribution programs, which by Nature are unsustainable, Christie ignores the cause and proposes the solution to be means testing. In essence he is suggesting redistributing the wealth of a wealth redistribution program.

You have heard me say many times "When wealth redistribution has been deemed moral, all that is left is to decide who is to be plundered and who is to receive the plunder". It appears Christie, for one, has deemed wealth redistribution to be moral because his solution to SS going broke is more wealth redistribution.

How does this affect real estate and notes? Just be aware that government's unfunded liabilities are technically bankrupted. When reality takes over and politicians come to realize there is no more money to fund these programs, you want to make sure you have good exit strategies, as well as sound ownership. I suggest purchasing properties at deep discounts and own them free and clear, or purchase with seller financing with favorable terms. These two methods give the best options for adapting to the inevitable chaos of consumption exceeding production.

If you have a comment or a topic you would like discussed, CONTACT ME It is from your input I get many of my topics.

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

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