Are you tired of real estate ownership?\u00a0I know I was\u00a0getting tired of owning real estate earlier this week. I am what you may call a “Night Owl.” I like working late into the night as my brain usually works the best with no distraction around. Hence I usually head to bed in the early morning hours.<\/p>\n
This past Wednesday started off as any\u00a0ordinary\u00a0Wednesday. I worked from 9am to 1am with breaks in the middle for a run, deal making, \u00a0managing capital partners, administrative tasks, \u00a0and \u00a0juicing (I started the juicing\u00a0lifestyle\u00a0nearly 30 days ago now thanks for my girlfriend.) I head to bed by 2am.<\/p>\n
5am <\/em>and my \u00a0cell goes off. \u00a0I miss it by sleeping through it<\/p>\n 5:15am<\/em> and my cell starts\u00a0chirping\u00a0again. I am thinking “Who in God’s Name is Calling Me at This Hour!?” I decide to ignore the call and stay asleep.<\/p>\n 5:45am<\/em> and I hear my text message bing. I am now up and I am cranky before my first cup of coffee and only 3 hrs of sleep. As I wipe the sleep out of my eye, I see that it is my property manager (god bless him for being a great asset to my firm) and the text message states:<\/p>\n “Call me ASAP. Problem at Armstrong Ave”<\/p>\n I am thinking the worst has happened:the house burned down or something happened to one of the tenants. I quickly scroll to my missed call log and dial him back:<\/p>\n Ring Ring<\/p>\n Manager<\/em>: Morning boss. We got an issue!<\/p>\n Me<\/em>: What is the issue? (Still half asleep and crabby; missing my cup of coffee still!)<\/p>\n Manager<\/em>: The sewer backed up into the basement and tenant is complaining that the house is smelling like $@!#. I need to know if I can call in for a emergency repair as it will cost over $600 to snake and clean up the basement.<\/p>\n Me<\/em>: Of course, as we cannot let the tenant live in that\u00a0filth.<\/p>\n (Internal Dialogue<\/em>) “… I hate this asset and why did not anyone warn me about this when I was getting into landlording!”<\/p>\n This one of the few reasons that I continue my discussion of “No Toilet<\/a>” Investment Assets with you, the readers. This week we turn our attention to Cash Flow Notes as a potential passive “No Toilet asset class.”<\/p>\n Cash flow notes are a debt instruments or promissory notes wherein an individual or business borrows money from another individual or business. The note is the proof of the debt . The note can either be secured or unsecured. If the note is secured then it will be accompanied by a mortgage or UCC document. This article will discuss the asset class of Performing 1st Mortgage Notes (hereafter referred to as Performing Notes.)<\/p>\n Performing notes are mortgage secured debt instruments that are current or where payments are less than 90 days past due.\u00a0The mortgage, also known as the security instrument, pledges the property as collateral to ensure the performance on the obligation. This allows the note holder to sell the property and re-coop his investment in the event the payer does not pay as agreed.<\/p>\n I had a\u00a0realization after I\u00a0owed my first condo for nearly one year. Realization<\/em>:\u00a0Notes are sold many times over. In fact during my one year ownership period my note was sold three times which I realized when I was notified that my loan is being serviced by another lending institution.<\/p>\n Investor who want to earn monthly cash flow can do so by purchasing cash flowing notes without having the headaches of a sewer backup or toilet issues. When you buy cash flow notes, you become the \u201clender\u201d \u00a0so the borrower pays you back the principal plus interest. Investors can make money purchasing cash flow notes\u00a0 at a discount and hold out the note to earn\u00a0money through interest from the repayment of the note from the borrower. Okay so how does an investor purchase Performing Notes?<\/p>\n Below is a simple step by step outline to buying performing notes:<\/p>\n What type of cash flow notes are you interested in purchasing. The following categories can you help you better define your cash flow note profile:<\/p>\n -Risk Profile (Loan to Value, Last Valuation date).<\/p>\n -Type of asset securing the Debt Instrument (Retail, Residential, Multifamily, Industrial etc.)<\/p>\n -Borrower Profile (FICO, Debt to Income, Recourse provision)<\/p>\nWhat are Cash Flow Notes?<\/h2>\n
What are Performing Notes?<\/h2>\n
Why and How to Buy Performing Notes?<\/h2>\n
Step 1 – Cash Flow Note Profile<\/h3>\n
Step 2 – Who Can you Buy the Note From?<\/h3>\n