Re: Compettition?

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Posted by John Behle on March 06, 2006 at 16:05:41:

In Reply to: Compettition? posted by Bill Taylor on March 05, 2006 at 23:22:23:


Sure, there's lots of competition in the note business. No question. The question is "Is it GOOD competition?" Not really. You might liken it to a group of Honda 90's lined up at a stop light and I'm on my VT1100.

There are tons of people in the note business, but most are very, very, in-adequately trained, financed and barely able to put together a deal. Instead of getting more education and developing their resources, they either putter along with minimal results or give up in frustration. It's not all that hard to get a proper education, they just need to know that they need to do it and where to get it. Usually that is going to be somewhere else than whoever gave them the in-adequate training. That's kind of like going back to a restaurant that gave you food poisoning a week ago.

So, my view of competition is that there really isn't any. I take it further than that. Since the others out there are poorly trained and lacking in resources, I work with them. I become their training and resources. I train them how to truly go out and find notes to bring to me. They learn that I am the backup for the massive number of deals that their "hundreds of funding sources" don't buy, can't move quick enough on or fall through on.

As to the deal you laid out. The notes might be difficult to sell unless you get a decent downpayment or carry back a second. Then, the yield you have to accept might not be that attractive. It would probably be far better off to keep the notes and use the cash flow to pay off the shopping centers earlier.

The rate on the commercial mortgages on the shopping centers is likely less than the yield rate you would have to sell the notes at. So, financially it would be better to keep the notes and then paying the shopping centers off quicker by tossing all the cash flow towards those payments.

Another possibility is to keep the notes and do what I described above for a few years. Then, at that time, the notes would be seasoned and have better LTV ratios. They could then be sold at higher prices, lower yields and create a better financial strategy.

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