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Cash Flow Business
Is a Cash Flow Business Right for You?
Just what is a cash flow business?
A cash flow business involves buying and selling "notes" that provide for periodic payments. The most popular notes are mortgages and land contracts. Though notes like auto loans and even medical payments are often bought and sold.
For example, if you sell you home on a land contract, you will expect to receive monthly payments for a number of years. Wouldn't it be nice to get all your money at once instead of monthly payments for 30 years?
Well, someone with a cash flow business can pay you a lump sum for your land contract "note". You will get the lump sum and the purchaser will then receive the monthly payments for your old home.
Often those with a cash flow business do not really buy notes themselves. Rather, they act as middlemen for wealthy people who actually purchase these notes.
If you operated a cash flow business you would find people who are receiving periodic payments (like someone who sold their home on a land contact). You could do this by advertising, looking at your local legal news for new land contracts, or by other means.
You would then contact the owner of a note and determine if they wanted a lump sum instead of periodic payments. Often people want a lump sum to pay off the mortgage on their new home or simply to stop the endless bookkeeping or their worry about the possibility not getting paid on time or having the payments stop altogether.
The next step in your cash flow business would be to contact people or organizations that want to buy they type of note you located. You describe the note and the property backing the note to the prospective buyer. They buyer will then let you know what he would pay for the note.
You would then negotiate with the note owner. The price you want to offer to the note owner will be less than the price your secret note buyer is willing to pay. The difference between what the note buyer is willing to pay and what you offer will be your profit.
Suppose a home owner sold his home for $250,000. The purchaser put a down payment of $50,000 and offered to pay the remaining $200,000 on a land contact at 6.25% over 20 years. This offer amounts to monthly payments of $1,461.86 for 20 years.
Now, you with your cash flow business located and contacted a wealthy businessman who was willing to pay $190,000 for that note.
At this point you start negotiating with the note owner by telling them that you can offer $180,000 for the note. The note owner will, of course, explain that they expected the full $200,000 for the note.
At this point, you will explain that interest rates may be going up and when they do, the monthly cash flow you would expect would actually be substantially higher than the $1,461.86 that you would be getting. Thus, you couldn't possibly pay the full $200,000. You can then explain that if they originally went through a mortgage company that there would be "points", loan origination fees, and other costs that would drive down the amount they actually received anyway.
Finally, since the note owner drove such a hard bargain, you offer $184,000 for the note.
Then, having more fully understood the value of his note and realizing that he was a pretty crafty negotiator to make you increase you price, he accepts your offer of $184,000.
During the transfer of ownership of the land contract note, you pay the note owner out of the $190,000 the real purchaser offered and place the note buyer's name on the note.
Your cash flow business is off to a good start making you $6,000 for that deal. And, you find that you can do this over and over again.
That is what a cash flow business is all about.
Of course the details of your cash flow business involve locating note owners, evaluating their note and the property backing it, locating note buyers who buy notes, and negotiating a sales price with the note owner. All this requires skill and a good understanding of these details as well as expert help as you get started and improve your skills along the way. So, don't think that you are going to get rich overnight. A cash flow business is a real business that requires work and dedication.
Here are resources to help you evaluate this opportunity and get you started toward a successful cash flow business.
Cash Flow Business: The Paper Source
Russ Dalbey's Winning In The Cash Flow Business!
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