Retirement: Partials
Building your retirement fund, means making safe investments that can generate the income (cash flow) that you need when you retire. A Self-Directed IRA, can help you build a future stream of retirement income.
Example:
The partial purchase creates a gateway for building long-term income by participating in the future cash flow of the note. This can be accomplished with little or no outlay of cash when utilizing an investor for the initial partial purchase. One of our favorite wealth-building techniques in the cash flow industry is the “Buy Full – Sell Short” strategy.”
This strategy is based on your purchase of the full payment stream available on a note from the holder/seller with the resale of a shorter payment stream to an investor. This enables a cash flow professional to earn a commission on the initial sale of the partial payment stream to the investor AND keep a portion of the future payment stream as a personal wealth-building vehicle. The payments remaining after a partial investment pays off are also known as the “tail-end” or “back-end” of a note. Retaining these payments can often be accomplished with only an investment of time and without the investment of personal capital.
To illustrate the power of Buying Full and Selling Short using the partial purchase, take a look at the example below:
- Property: Single Family Home
- Sale Price: $135,000 w/$10k down
- Original balance: $125k
- 10% interest with 360 payments of $1096.96
- Payments made to date: 54 months
- Remaining balance: $121,248.52
- Remaining term: 306 months
Because of the time value of money:
- Investor 1 bought the full 306 months @ $92,804
- Investor 2 buys 186 months (frontend) at $95,046
- Investor earned a broker fee: $2242 @ closing from Investor 2
- PLUS: Investor 1 keeps 120 payments (backend) of $1096.96 (starting in year 15)
The investor received $2242 at closing (now) and will receive 120 payments of $1096.96 starting in 15 years.
If you look carefully at the math, the full note was bought for $92,804 and the partial was sold for 95,046. You now have a stream of future income that has the potential of an infinite rate return. If the note is paid off early, your return stands to substantially increase.
Education: Partials
The cost of a college education has sky rotted over the last 10 years. The tuition at many colleges is more than $50k/year. Even the tuition at a public university can cost students more than $25k/year.
Who knows how much a college education will cost when your children are 18? Is a public university sufficient or can you afford an Ivy League education? Let’s project something that comes close to Ivy level. In today’s dollars, an Ivy League education costs about $50k/yr. While it might not be exactly realistic, we will use this for our example. If you have one child, you would need to earn between $4k to $6k/mo to pay for 1 year of tuition. We won’t even add in the cost of room & board.
We can use similar numbers as the example above. That is, you need the steady income to arrive for 4 years starting, let’s say, in 15 years from now.
Using the same numbers from the Retirement example above, this partial investment means you will start receiving a monthly payment of $1096 starting in 15 years. You need 4 of these partial payments per month to pay for your kid’s college education. Given that you will receive 120 payments, you probably would have enough for more than 1 child to attend college or perhaps contribute to graduate school tuition. And these streams of revenue didn’t cost you anything. Of course, you need to have the initial $125k to invest in your first note but that same $125k can be used to buy all 4 of your notes over time because you recapitalize each time you sell the partial.
Portfolio Diversification
Did you sell your house and owner finance it? Do you need money today and are interested in selling your note? We buy notes and can usually provide both a full and partial option purchase option.
Are you tired of the ups and downs of the stock market? We had a good run in 2024 with the markets hitting all-time highs. But this can’t go on forever!
Add some diversity to your investment portfolio by buying notes. They are secured by real estate but you have none of the worry about trash, taxes, and tenants.
We can help you diversify your portfolio to hedge against stock market fluctuations.
Sell Us Your Note
Did you sell your house and create an owner-financed mortgage note? Need money now and need someone to buy your note?
We can provide a competitive offer on your note. Even better, we can usually offer to buy a partial note whose balance matches the cash need that you have.
Get in touch with us to see how much we can pay for your note.
