Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital
Your favorite Master Note Buyer – Straightforward, Honest, Fair…
Over the last thirteen years my average commission on a closed transaction has been approximately $1,600. If I take just the last five years of closed transactions my average commission has been approximately $3,300! Over the years I have found a few specific ways to make more money on each and every transaction. As your favorite Master Consultant in the field of private mortgages notes, I would like to suggest some ways for you to potentially make even more money on every closed transaction you have in the future. I recently visited Kansas City Missouri and found out that the state motto for Missouri is “The Show Me State”, so let me show you three ways to put more green in your pocket.
General Funding Sources vs. Specific Funding Sources – Let’s start with the funding sources that you choose to send your accepted transactions to. It has been my experience that you can make real good money when you choose a funding source that will purchase notes secured by all types of properties, all shapes, all sizes and all risk levels. To make even more money on a transaction you may want to try a funding source that specializes in purchasing the exact type of note that you are submitting to them. For example you might have a note with a balance of $30,000 secured by a commercial property. You might be able to go to a general funding source and receive a purchase price of $25,000. You may also be able to go to a funding source that specializes in notes under $50,000 secured by commercial property and get a purchase price of $27,000. If your note holder accepted a purchase price of $24,000 you might be able to earn an extra $2,000 by using the funding source that specializes in that type of transaction. You can determine which funding sources specialize in a certain type of note secured by a certain type of property by thoroughly reviewing your funding source directory.
In addition, the funding source’s speed of closing transaction could be a factor in making even more money on a transaction. For instance, if you know that a particular funding source takes 6-8 weeks to close a transaction where another funding source could close the transaction in 2-4 weeks you may be able to use that in your negotiations with the note holder. You might tell the seller that he will receive $25,000 if wants to wait 6-8 weeks for it to close or $23,000 if he wants it to close in 2-4 weeks. Try it!
Full Purchase vs. Partial Purchase – You can make real good money by just closing transactions using the standard full purchase option. With all of the different statistics I keep for my business this one has to be my favorite. My average commission on full purchase transactions over the years has been approximately $1,900. However, my average commission on partial purchase transactions has been approximately $3,700, almost double! To make even more money on each transaction you can try to get the note holders to accept a partial purchase rather than a full purchase. I believe the reason for this is that the amount of the discount is extremely apparent to note holders when you give them a full purchase option and as a result you need to be much more competitive and take less of a commission to get them to accept your offer. With partial options, if we present it to the note holders in a “positive light”, we can show the note holders several different ways to get cash now by taking little or no discount. For more exact information on partial purchases read my past article entitled Push the Partial.
Retail Prices vs. Wholesale Prices – As a consultant in the private mortgage niche you can make real good money by just doing transactions with the funding sources using their Retail prices (when the funding source pays all of the costs). I did just that for the first 3+ years of my business. However, to make even more money on each transaction you may want to consider doing some transactions with the funding sources using their Wholesale prices (when the costs of the appraisal and title are deducted from your commission). When a funding source gives you a Retail purchase price their yield requirement will be higher (because they are risking the cost of the appraisal and title fees) and that will give you a lower purchase price which in turn means you will have to offer less to the seller. When a funding source gives you a Wholesale purchase price their yield requirement will be lower (because you the consultant are risking the cost of the appraisal and title) and that will give you a higher purchase price which in turn means you can offer more to the seller. When I started to use the funding sources Wholesale prices my volume more than doubled the next year. By offering more to the seller you will get more prices accepted and do more transactions that will make you even more money. Check with the funding sources or your favorite Master Consultant on a case by case basis for an idea of what they might think the costs will be on a particular transaction. In addition, not every funding source offers both Retail and Wholesale pricing so refer to your funding source directory for the funding sources that offer both pricing options.
As a consultant in the private mortgage niche of the cash flow industry you can make real good money. However, by using the three above mentioned ways of doing transactions in the future you might be able to make even more money. Now that you have this knowledge, keep up your marketing efforts and get ready to put more green in your pockets soon!