1. AMERICA’S GREATEST REAL ESTATE TRAINING The James Smith Training Organization Note Brokering Commercial Paper Turn a $ 1 Investment into $ 5 Million Net Worth Within Five Years Even If You Have ▪ No Job ▪ No Money ▪ No Credit ▪ No Experience Gary A. Barnes, MBA Instructor gary@opmmentoring.com www.opmmentoring.com/gmbc.files Published by Blue Spring Press, LLC

2. What is a “Note”?

3. Promissory Notes are worthless pieces of paper, unless... What is a “Note”?

4. Promissory Notes are worthless pieces of paper, unless... Collateralized by either... ➣ Mortgage ➣ Deed of Trust What is a “Note”?

5. - Financial Calculators - HP 10bII $ 29.95 - $ 39.95 Texas Instruments BA II $ 29.95 – $ 59.95

6. - Function Keys - N = Number of Payments I/YR = Interest Rate Per Year PV = Present Value PMT = Monthly Payment FV = Future Value If you know any of the 4 values, you can always calculate the 5 th one.

7. - Note Broker Fees - What is a Note Broker?

8. - Note Broker Fees - Typical Commissions / Fees * $0 - $49,999 $50,000 - $99,999 $100,000 - $249,999 $250,000 - $499,999 $500,000 - $999,999 $1,000,000 + 10 % 8 % 6 % 4 % 2.5 % 1.5 % What is a Note Broker? A middleman between a note seller and a note buyer. Note Brokers function much like a real estate agent, bringing buyers and sellers together and earning a fee for facilitating the transaction. * Commissions based upon what the Note Buyer actually pays, not on the original face value of the note.

9. - Example # 1 – Using the Financial Calculator Example # 1: A homeowner borrows $126,000 at 7%, amortized over 30 years. What is the monthly payment?

10. - Example # 1 – Using the Financial Calculator The correct answer is... Example # 1: A homeowner borrows $126,000 at 7%, amortized over 30 years. What is the monthly payment?

11. - Example # 2 – Using the Financial Calculator Example # 2: The seller has a note with a face value of $126,000 at 7% interest, amortized over 30 years. The note is a new note (but do not discount for the lack of seasoning). How much would a note buyer be willing to pay to buy this note if he wanted to earn a 12% yield?

12. - Example # 2 – Using the Financial Calculator This is a two step process: 1) Calculate the monthly payment on the original note. 2) Calculate the present value on the payment stream at 12%. The Note Buyer would be willing to pay $81,496.18. After subtracting your fee of $6,519.69 the seller would get $74,976.49.

13. - Example # 3 – Using the Financial Calculator Example # 3: The seller has a note with a face value of $126,000 at 7% interest, amortized over 30 years. The note is 3 years old and all the payments are current. How much would a note buyer be willing to pay to buy this note if he wanted to earn a 12% yield?

14. - Example # 3 – Using the Financial Calculator This is a two step process: 1) Calculate the monthly payment on the original note. 2) Since the Note Buyer is buying only 27 years of payments (324 months), use the payment derived from Step # 1 to calculate the present value on the payment stream at 12%. The Note Buyer would be willing to pay $80,491.71. After subtracting your fee of $6,439.34 the seller would get $74,052.37.

15. - Example # 4 – Using the Financial Calculator Example # 4: The seller has a note with a face value of $126,000 at 7% interest, amortized over 30 years. The note is 3 years old and all the payments are current. The note has a 10 year Balloon Payment. How much would a note buyer be willing to pay to buy this note if he wanted to earn a 12% yield?

16. - Example # 4 – Using the Financial Calculator This is a 5 step process: 1) Calculate the monthly payment on the original note. 2) Calculate the amount of the Balloon Payment. 3) Calculate the Present Value of the 7 years of monthly payments. 4) Calculate the Present Value of the Balloon Payment. 5) Add the two Present Values together. The Note Buyer would be willing to pay $94,360.60. After subtracting your fee of $7,548.85 the seller would get $86,811.75.

17. - Example # 5 – Using the Financial Calculator Example # 5: The seller has a note with a face value of $126,000 at 7% interest, amortized over 30 years. The note is a new note (but do not discount for the lack of seasoning). The seller needs $20,000 now, so will sell some of the payments. How much would the seller still be owed after receiving the $20,000 How much would a note buyer be willing to pay to buy this note if he wanted to earn a 12% yield?

18. - Example # 5 – Using the Financial Calculator The Note Buyer would buy 31 payments for $22,000. The seller would still be owed $122,501.71 of the original $126,000. After subtracting your 10% fee of $2,000 the seller would get $20,000. This is a 3 step process: 1) Calculate the monthly payment on the original note. 2) Calculate the Number of Payments the Note Buyer will buy. 3) Calculate the Future Value of the remaining payments.

19. How To Find Note Sellers How To Find Note Sellers

20. - Utah County, UT, Recorder’s Office –

25. - Orlando, FL, Recorder’s Office –

27. -Telephone Dialog – (Working With Note Sellers) “Hi, I’m a real estate investor and I was looking on the public records the other day and I noticed that a few months ago you made a private loan to (name of borrower) for $XXX,XXX. “I was just curious, would you be interested in receiving a one-time, lump-sum, ALL CASH payment for your note? “Wonderful, let me get a little information about the note: Are all of the payments current? Has the payer ever been late in making the payments? What is the interest rate on the note? Is that a fixed rate or variable? Is there a balloon payment? Is there a pre-payment penalty? Is this a first mortgage, second mortgage, or some other?

28. -Telephone Dialog – (Working With Note Sellers) “Thank you. I’ll turn this into underwriting and see what we can do. I’ll get back to you in a day or two.” Then you start contacting Note Buyers to see what they will offer. Suppose that the Note Seller says that he is a money lenders who lends to real estate investors – then get the information as to what he is looking for; such as interest rates, balloon payments, maximum loan amount.

29. How To Find Note Buyers How To Find Note Buyers

30. - Finding Note Buyers – Google the phrase “Mortgage Note Buyers”. You will get thousands of hits. Start contacting them and find out what they buy and what their terms are.