Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital
Your favorite Master Note Buyer – Straightforward, Honest, Fair…
I hope you had a Happy Halloween and are looking forward to the upcoming holidays! I always get questions about how to make more money in the seller held note business and how to do more transactions so I am going to give you a few tips, ticks and treats in this article.
Over the last nineteen years my average commission on a closed transaction has been approximately $3,800. Over the years I have found a few specific ways to make more money on each and every transaction. As your favorite Master Buyer in the field of seller held 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 Institutional Note Buyers vs. Private Note Buyers – Let’s start with the note buyers 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 note buyer that will purchase notes secured by all types of properties, all shapes, all sizes and all risk levels. These would be your Institutional Note Buyers. To make even more money on a transaction you may want to try a note buyer 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 $40,000 secured by a commercial property. You might be able to go to an Institutional Note Buyer and receive a purchase price of $30,000. You may also be able to go to a Private Note Buyer that specializes in notes under $50,000 secured by commercial property and get a purchase price of $33,000. If your note holder accepted a purchase price of $28,000 you might be able to earn an extra $3,000 by using the note buyer that specializes in that type of transaction. Time and experience in the business, networking at industry conventions and associating yourself with honest and ethical individuals will help you build your list of both institutional and private note buyers.
In addition, knowing the note buyers speed of closing could be a factor in making even more money on a transaction. For instance, if you know that a particular note buyer takes 6-8 weeks to close a transaction where another note buyer 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 $27,000 if wants to wait 6-8 weeks for it to close or $25,000 if he wants it to close in 2-4 weeks. Try it!
Full Purchase vs. Partial Purchase – This is something I have been preaching for many, many years. 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 $2,400. However, my average commission on partial purchase transactions has been approximately $4,700, 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.
Retail Prices vs. Wholesale Prices – As a note broker in the seller held private mortgage niche you can make real good money by just doing transactions with the note buyers using their Retail prices (when the funding source pays all of the costs). I did just that for the first three or so years of my business. However, to make even more money on each transaction you may want to consider doing some transactions with the note buyers using their Wholesale prices (when the costs of the appraisal and title are deducted from your commission). When a note buyer 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 note buyer 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 note buyers 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. In addition, not every note buyer both Retail and Wholesale pricing. The default is usually Wholesale pricing but check with the note buyers that you use to see what they offer.
As a note broker in the seller held private mortgage niche 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 give these tips, tricks and treats a try!
Remember, success demands action! Keep on marketing, it’s going to work! TWITA! (That’s What I’m Talking About!)