Posted by John D. Behle on June 12, 2009 at 20:08:42:
In Reply to: Plastic Surgeons posted by SolidReturns on June 11, 2009 at 10:24:18:
Any paper like that with Plastic Surgeons is usually in the form of an un-secured note. But, any non real estate secured paper can be set up to be restructured or structured differently upon creation.
You might find types of paper that you are comfortable with. For example, a student of mine started buying “Kirby” vacuum cleaner paper. He didn’t have any security, but did have great rate of return (87%) and a guarantee from the Kirby dealer and he was ok with that.
But then again, I had another student that was lured over to the dark side so to speak. He began buying auto paper. He relaxed his standards and expanded his amount he was buying. He borrowed from investors and bought all the paper the dealer sent his way. The problem was the dealer was fraudulently creating “dummy” paper that had no actual autos attached. He took a bath. All his great returns from his real estate paper and his earlier good deals went towards the losses on the fraud that he didn’t have to let happen.
So, either you end up trusting the creator of the notes and possibly getting burned or you buy the individual notes and do the due-diligence on each one. I’ve had to repo cars. It’s not that fun and I can’t imagine trying to repo a water conditioner or from a plastic surgery patient - an augmentation.
Now, if you get a dealer, surgeon or whoever to put up their own real estate as collateral, then that can work. You set up a flooring plan and a type of private HELOC, but then once you suggested that, they would realize they don’t need you and your rates. They could head off to a cheaper lender. You might also have to look into laws regarding origination, REG Z, usury, recission rights, etc.
So, you can look at another option which is re-writing the paper or pre-writing it to meet a note buyer’s needs. Here are the options.
Option 1 - Existing notes
If the Plastic Surgeon or other note source has existing notes that are not in a safe, secure, buyable form, then they need to be changed. You would approach the payor and offer to lower their rate, extend their term, etc. if they would put up real estate as collateral and turn the un-secured private note into a trust deed or mortgage depending on your state.
Option 2 - Pre-structured paper
The other option is just to create the new paper in a better format. As the representative for the surgeon discusses costs and financing with them, they can ask if they would “like it to be tax deductible?” Real estate financing still has interest write offs. You might be able to offer them a lower rate and possibly a tax deductible scenario by writing a note against their property instead of an un-secured note with the surgeon.