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BUY and SELL NOTES

Mitch Stephen|By March 11, 2018

BUY and HOLD turns into BUY and SELL NOTES

Sometime I buy houses with a very specific motive;

I Buy – DO NOT FIX – Sell with “owner financing” and hold for cash flow.

This is a great plan and one of my favorites.

I buy a property, sell it at a profit and then sit back and watch as the new owners
go to town fixing up their house…and…MY COLLATERAL!

This can take some time because most buyers don’t
jump right in and fix up the property over night but my folks on McCauley did.

I let the Buyers of McCauley move-in on a lease because they were very eager and determined and
wanted to begin fixing up the property.

They wanted the property ready for move-in by the time they closed on the purchase of the house.

I was astonished to see them completely gut the house, rip into the foundation and begin painting the exterior
the next day. The AC units were being bid and electrical, sheet rock and interior paint was
all contracted and the ink wasn’t even dry on the lease yet.

This is pretty surprising because the new occupants certainly didn’t own the place yet. We hadn’t closed.

We closed on the property on April 20th. The sales price equals $65, 000. The new buyers have done such a great job that the house is now worth no less than $95, 000 on the low side and probably about $110, 000 on the high side.

They did such a great job that I have already found the note buyer.

It gets really easy to sell notes when you have a $35, 000+ spread between the balance of the note
and the value of the property;especially when the face value of your note is 10.5% for 15 years.

This goose is laying a golden egg but you have to be able to recognize the signs.

When I saw the degree of fix-up I knew the potential value. I started looking for a
note buyer right away. I will sell this note with no discount because of the spread between
value and balance…I like to call it “Blue Sky.”The note buyer either gets his 10.5%

or he potentially profits from the Blue Sky he was looking at when he first bought the note;

reloads the house for $100, 000 with owner financing.

This is also why, from time to time, I like to drive by the houses I hold the financing on.

Sometimes I’m completely awestruck at the improvements my buyers have made.

Suddenly, a note is very easy to sell.

Buy
NO FIX UP
Owner Finance
BUYER Improves the property
YOU Sell The Note

$38,000 ………………Acquisition Price
$ 1,000 ……………….Bird Dog
$ 2,000 ……………….ME
$41,000 ………………Borrowed …8% Interest Only………… $273 /mo

$65,000 ……………….Sales Price
$ 6,000 ………………..Down Pmt
$59,000 ……………….Owner Finance @11% for 15 years ……… $670 / mo

TOTAL CASH FLOW …… $437/mo

+ $ 2,000…..Borrowed Equity
+ $ 6,000…..Down Payment
+ $1,340 …..2 months rent
+$59,000…...Note Sale
$67,000……TOTAL INCOME!
– $41,000…… Less the amount I borrowed
$27,340………………….……………………………….Net Profit 2 months

You can learn to do this too!

You’ll learn how to do this and so much more!

No matter where you are now I can show you how to turn things around if you do what I teach.

Mitch

Posted in Notes