Cash Flow Notes

What are cash flow notes? Cash flow notes are similar to an IOU for debts that can either be purchased or sold. If you procure one, the debtor automatically owes you the debt. These notes delineate a broad range of debt instruments such as tax lien certificates, home mortgages, trust deeds, and several other types of debts.

At present, among the most popular type of notes are those obtained from the real estate industry. Investors sell them to collect payment in a lump sum instead of waiting for payments to be forwarded to them monthly.

Selling Cash Flow Notes

After you learn the cash flow business system, you should be ready to find, buy, and sell cash notes. Here are some investment tips if you wish to avoid a cash flow notes scam and have smooth transactions with potential note buyers:

  1. Contact an attorney who can draft a master broker’s contract for you. This document should establish the terms of your business deals with your buyers. The most critical segments for you may be the sum of your finder’s fee and what you need to accomplish to earn it. Remember that the finder’s fees for this kind of transaction are routinely based on the sale’s total amount. Your broker’s contract should necessitate that the buyer must give you a finder’s fee if the transaction is concluded for a specific cash flow note through a seller who you introduced, even if you don’t intend to assume further role in arranging the purchase. This process is designed to guard you in case your buyer decides not to work with the middleman by transacting with the seller directly after you furnish the introductions.
  2. Look for real estate appraisers. They will appraise the real estate’s value protecting the notes you will be administering, since a cash flow note buyer will persist on having this accomplished. You should take the time to prepare this yourself, which is one of the reasons why the buyer will pay you the finder’s fees. Even so, keep in mind that the real estate’s appraised value is not similar as the note’s value. The real worth of the note locked in by the real estate is established by the remainder amount of the debt owed on that property reduced by the possibility that the debtor will fail to pay, among other factors.
  3. Make your business known. Promotion should be seen in newspapers, magazines, as well as websites. It is also beneficial if you create your own business website. Consequently, however, the referrals from your past pleased clients will have a constructive impact on the promotion of your business. You can also try using IOU notes for sale as more people are more common with IOU’s.
  4. Find sellers by contacting real estate agents, banks, escrow agents, mortgage brokers, and title companies. If you are not very sure who to consult, large firms frequently proffer “Secondary Marketing Department” that supervises these notes.
  5. Slowly build up a database of reports on notes based on the response to your promotion and advertising efforts. As you become more experienced, you will improve your ability to put the reports systematically in your database based on their real value. Keep in mind that the notes are secured and protected by a subprime mortgage that might have lower worth than the underlying real estate property since the debtor is more likely to default in payments.
  6. Look for buyers for the notes in your database. Find local real estate brokers who can help you get in touch with property investors as well as professional cash flow notes buyers. Note that until you are purchasing these notes with your own capital, it is the purchasers who completely decide on the value of the notes. However, as your experience grows and your reputation becomes established, buyers will begin to rely on your projections and you will eventually have the right to increase your finder’s fees.
  7. During the process of negotiation, assist the purchaser and the seller to come into an agreement by doing the required legwork, which they don’t have the time to accomplish. These tasks include collecting information, doing real estate appraisals, and even suggesting compromises, to name a few.
  8. Similar to the efforts you would exert when you sell your annuity, to earn money with these investment options, you should make the most out of your client network, your reputation, your capability to precisely evaluate the real worth of the note, and your funds to purchase these notes and sell them to prospective clients.
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13 years ago

Thank you for posting this article to my weekly financial independence compilation at

Hope to see another one next week.