Time is Our
The value of a 30-year note diminishes rapidly as you
move further out in time. However, if you only sell 5 years worth of payments, you've sold the valuable part,
the part that we will pay most dearly for.
this principle (look at the
attached amortization schedule) this is an actual partial purchase that we've funded in February
2010; the example is a $200,000 note with a 30-year term at 8% interest. The monthly payments
are $1,467.53. The first payment due February 2010; an investor might offer $154,099 for this note. This is
approximately an 11% investor yield. As the seller, you end up with $154,099 cash today.
our client didn't need that entire amount. He was
able to strike a much more profitable deal. He only needed $100,000.00 because he had a
business opportunity. He sold only the next ten years of his note for $105,000.00 then he
had the money he needed, plus $5,000 to spare.
We purchased the
payments that are most valuable; we paid a premium for them. At the end of the ten years, the payments
revert back to him. Get this! He still has a note with a principal balance of $175,449.23!!
If this was your
note and the buyer sold or refinance the property; paid you off that very day you would receive
What happened is
that you received the $105,000.00 that allowed you to take advantage of the business opportunity (possibly
earning you even more money), plus you still receive the remaining value of your note.
$105,000.00 profit from the partial sale; given enough time you still have a $175,449.23 remaining balance, for
a total value of $275,449.23 for a $200,000 note.
But wait a Minute; 7 months after
the sale of the payments your "Balance to Seller is $100,297.69!"
Looking at the amortization
schedule; the original partial was done in February and seven months later in September of the same year the
balance to the seller is over $100,000. If the homeowners sold or refinance the property you the seller would
receive 100% of your original note balance.
Note: When you
sell payments you DO NOT have to wait that entire term to sell more
payments or the balance of the note; we typically quote "we will buy more payments or the balance of the note
with as few as 12-18 months of on-time payments to us".
Consider this; if you came
back and sold the balance of the payments you could receive approximately the same
Receive $105,000 in
February and $100,000 in 12 to 18 months or a $46,000 discount with a full sale; which would you rather
The secret of the
time value of money offers you the note owner many ways to satisfy his or her particular needs. Presented with
these choices, note holders seldom have any difficulties deciding which way to go. Every situation is
If your note had
one; you could also sell off or retain a balloon payment. PLUS you have the opportunity to sell more payments or
the balance of the note usually after 6-12 on-time payments.
If there was ever
a way to have your cake and eat it too, this has got to be it. You don't have to be victimized by what you don't
know any longer. You can put the time value of money to work on your side. When selling your note, be sure to
ask for a full purchase quote, and also a quote on a "Partial Purchase.”