How can a investor make money from house notes, and what is House Notes

Hi Mike.....a note (promissory note) is a promise to pay someone an amount of money over a period of time. Most people think of these payments as a mortgage or a trust deed. But that's only half the story. The note deals with the terms of the repayment when you buy a house, but the mortgage/trust deed is the security instrument that gives the lender his rights to resolve the situation (foreclose) if you do not pay according to the terms of the note as agreed. If the seller chooses, he can sell the note, or the rights to collect those payments over a period of time to another person. Here's where it gets interesting. If the seller were to get all cash for his sale, he would be very happy, but let's say he has to carry back some of the financing to help close the deal. Let's say $100,000 at 6% at roughly $660/month for 30 years to help close the deal. That 100,000 is not worth 100,000 any more. It becomes worth less in today's dollars because he has turned the 100,000 into the right to collect $660/month for the next 30 years. Here's where we deal with the time value of money. I remember when $20 was a date consisting of dinner, a movie, and gas in the car. That date costs about $60-75 today (inflation).....a dollar today is worth more than a dollar in the future.....the time value of money. So if the seller wants to sell the note, he is not selling 100,000....he is selling 360 payments of 660/month for 30 years. So how much will $660 buy in 30 years relative to today's dollar. you might give him $80 today for the right to collect 660 on 30 years. So the price of the note is "discounted". The right to collect those 360 payments over 30 years may only be worth 75,000 in today's dollars. So if you can convince the seller to take 70,000 for his note and you find an investor who is willing to pay 75,000, you have a buyer and a seller, and you make the 5,000 difference. Geez, it's sounds so simple, I'm sorry I got off on a tangent and rambled. That's it in it's simplest form but it can get complicated and profitable if you only buy or sell part of the payments and not all 360 of them. So what it boils down to is....if I had $50 in one hand, and $100 in the other hand, which would you take? Probably the $100 right? But what if i told you if you picked the $100, you'd have to wait 10 years to get it, would you take the $50 today? Hope I helped you out and didn't confuse you. If you want more info about notes...PM me.

Hi Thanks (TRSD)

It sounds very interesting I read Dean's book and he stated that people have became rich my just buying and selling notes. I was wondering what is the first step in getting started in the " Notes" side of the realestate business like for example were would I start looking for notes at to find one to try and sell to a buyer, so I can make a profit.

Thanks again

(TRSD)

Mike

You can find notes at the county recorders office in your area, the same place that all other legal documents are found. If you want to check out some info about notes, www.papersourceonline.com has a free 7 part introductory course that will help you decide if you want to pursue the note business.

Would this be something to start out in as a newbie? Or would it be easier and faster profit to start out with the other

Lets look at it from a different stance;
$660 month x 12 months = $7920 yr x 30 yrs =$237,600
SO, with a note for $100,000,collecting $660 month for 30yrs totals $237,600

When you want to sell above note, its sold at discount,but a discount of which price you may ask, the $100k or $237,600

If you really needed the $100,000, a buyer may negotiate the price,but remember that the total will bring in $237,600 over 30yrs