It’s tax time again, and the odds are that you or someone you know may get an unexpected message from your accountant or the IRS. That message? You owe a bunch of money from last year’s return or from 2014 or some past year’s filing – money you do not have. Maybe your accountant made a mistake, maybe you forgot to provide some crucial information, maybe you can’t substantiate some deductions. Whatever, you have a problem. You have to find money you don’t have.
Well, if you are a note holder, your note could be the source of the cash needed to satisfy the IRS. Take a look:
Say you have a $100,000 note at 6% for 240 months with a monthly payment of $716.43. You have received 15 timely payments and the current balance is $96,637.27. Your accountant shocks you when he says “you need to come up with $30,000.”
One option to consider would be to sell 60 monthly payments of $716.43. In return, the investor would give you $30,000 today. After the investor receives his 60 payments, the note would come back to you, and you would receive the remaining 165 payments. The principal balance at that time would be approximately $80,363.85.
You get your $30,000 today, the note stays in tact, you satisfy the IRS, and you then get to enjoy all the remaining payments when the note reverts to you.
The greatest thing about being a note holder is the opportunity it provides you to get the cash you need when a cash crunch pops up in your life. You may have a better cash option than your note. That’s fine. Options, we all want options. Explore your options, then decide.