If you watch much TV, especially sports, you have seen the Liberty Mutual commercial with the tag line, “Only Pay For what You Need.” The commercial features the character Doug and his ostrich like friend, LiMu Emu, pitching insurance coverage for your car. The latest version introduces Doug Jr. and LiMu Emu Jr., dressed like their “parents” and driving away in a little car through a bed of flowers. I kind of like it.
I think of the note business every time I see this commercial. Why? Because I come up with our own tag line:
“Sell Part of Your Note and Get What You Need.”
Here is an example of what I mean:
Let’s say a noteholder sold a property and carried a $100,000 note at 6% for 240 months, with a payment of $716.43 monthly. He has received 12 timely payments, likes his buyer and likes the income. But, he needs some cash. $25,000 to be exact. He can’t easily get his hands on this amount and hates the idea of selling his note. Possible solution?
“Sell Part of Your Note and Get What You Need.”
Looks like this:
- Current principal balance is $97, 330.05.
- 228 payments remain.
- He sells 48 of the remaining 228 payments.
- He receives $25,000 today.
- The note buyer receives the next 48 payments of $716.43.
- After the 48th payment is received, the note reverts back to the seller.
- The principal balance at that time will be $84, 899.97.
- The seller then receives the remaining 180 monthly payments of $716,43.
The note holder sold less than $13,000 in principal to get the $25,000 cash he needs today. He solves his “today” problem and at the same time helps his “tomorrow” income situation. It can be very enticing for this type of note holder to sell part of his note now knowing in advance the remainder will come back to him in the future.
“Sell What You Need.”
