How to Turn performing note into 20k in cash flow

Question

How can I go from one performing note to 20k in cash flow

Thanks in advance

Chris Seveney · Answer

@Jay Hinrichs

I agree the individual put monthly and asking this type of question is like getting a real estate license and saying how long till I make $250k a year? The answer is who the eff knows. It could be done in a few years or it could never happen. You hit the nail on the head in that if you were to only buy performing loans you would need around $2.5M - $3M of your own money.

If you are using OPM then you would need to arbitrage it and probably would need closer to $7-8M.

If you started playing into the NPN space you could also do it with around $2.5M of OPM

Don Konipol · Answer

@Bradley Ritter

One answer is that it depends if you’re talking about passive investing, active investing, or running a note business.   Theoretically, the more time commitment, management, marketing, sales, supervision etc you’re willing to put in, the more you MAY earn from any $ invested.  So, for example, if you invest with my fund, you receive about 11% annual return.  I get a 1% servicing fee, and 3-4 points.  So if you can afford the time to build an operation like mind, and you have the knowledge, experience and talent that I do, you could do it yourself and receive an annualized 15-16% return.

Further, if you leveraged by either borrowing at say 8%, or ran a fund and received the 4 points origination fees, and 1% servicing fee, then you’d earn a lot more on your invested capital.  Of course much of the earnings would be the result of your ‘job’ of being the operating partner of the fund as well as the loan originator.

So to summarize, you need to decide whether you want a passive investment, active investment, or a business.

Marco Bario · Answer

@Bradley Ritter -

Just to be transparent, I'm not at that level yet. Lots of directions you could go in.

Here are my thoughts. These apply no matter which direction you head with notes:

• - Seek out solid training and mentoring if you'd like to fast track and increase your chances of success
• - I don't see a way to get there in a reasonable time without a full-time commitment. Some will have exceptions to share. I'm full time (and then some) in my business.
• - Practice calculating cashflows, underwriting deals, performing due diligence, and closing deals. If you haven't already, watch THE BANKER which you can view now for free on Apple TV+ if you sign up for a trial. You'll know what I'm talking about when it comes to knowing these functions inside out after you watch it.
• - Never stop learning. Read books, listen to podcasts, watch webinars, and attend conferences...
• - Attend conferences (mentioning for the 2nd time) so you can network, stay current, increase referrals, and help others on their way up.
• - Study market and financial trends
• - Begin to develop deal flow and your network of investors or buyers. You need a solid stream of both. 
• - Cultivate and develop your team: servicers, attorneys, title companies, accountant, etc...
• - Research laws and licensing requirements.
• - Understand and preferably at least kick the tires on different strategies: Brokering, NPN workouts, 1st liens, Jr. liens, NPN --> REO, Partials, Bankruptcy, rentals, flips, etc... I invite anyone to debate me on this: note investors must be the most creative and most nimble of any type of real estate investor. 
• - Learn marketing. 70% of my time buying and selling seller-financed paper is spent on marketing. Whatever path you choose, there will be marketing involved. 
• - And finally, realize you're running a business and treat it as such.

Jay Hinrichs · Answer

I think most folks are thinking monthly..  so 240k a year at say a nice 8 to 10% yield you simply need to invest 2.4 million in cash.

Bradley Ritter · Answer

@Don Konipol a business 🙃.. how did u get started??

Bradley Ritter · Answer

@Marco Bario yeah long story short I would like 20k a month from note investing... I understand that you can make a killing if you buy npn in bulk ..but I was hoping to get some ideas for me that’s practical ... I’m planning on starting off by buying some partials from @Chris Seveney and eventually buying a  performing note with a lot of equity then start leveraging it to buy more more more and more ... lol I just finished dan van horns book for the second time

Thanks in advance

Bradley Ritter · Answer

@Jay Hinrichs 🤦🏾 lets go half lol

Bradley Ritter · Answer

@Chris Seveney lol my bad 20k a month

Marco Bario · Answer

@Bradley Ritter - I think the invitation is to share more specifics about your goals and maybe an idea or two of your own to get the conversation flowing.

John Underwood · Answer

Also this only until the note is hopefully paid off.

How to Turn performing note into 20k in cash flow

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