Investing In Notes 3 — Video

Investing in notes 3 addresses title insurance, note income, and future note purchasing. Are you familiar with potential title problems?

 

Transcript:   Hi this is Jeff Brown the “BawldGuy”. We’re going to continue our discussion on note investing today. Title is going to be up first, and then income. When you’re doing a title search, and you want the title company to do it completely, and you want to get the most insurance you can, you want to make sure that there’s no IRS lien or the like against that property, because no matter what you have, and no matter how much you think you’re first in line, the IRS will always come before you. This is why you get the insurance. They’re going to check everything. They’re going to check all the easements. They’re going to make sure there’s nothing out of line. That means if there’s a mistake made, it’s on the title insurance company, not you. Now, I know I glossed over that, but just understand that’s part of your due diligence, and you want to ensure – pun intended – that you get that done, and you don’t get cheap on yourself. You get the premium policy. Now, let’s talk about income. Let’s go back to our example of a $100,000 note. It’s payable 30 years, completely amortized at 10 percent. Now, that’s going to mean you have a payment of about $877.50 a month – a few pennies more than that. Now, that means if it pays off in five years – and that’s just random luck; we never know when they’re going to pay off. But let’s say this one pays off in five years. In five years, you will have received just a little bit over $52,500 in payments. The payoff at that time will come to you out of escrow at about $97,500 bucks. That means that, give or take, in five years, your $65 grand turned into about $149. Now, what you’re going to do at that point is you’re going to do the same thing you started out with, but now you have $149, not $65, and you’re going to buy a note somewhere in the vicinity of $220 to $230,000, and you’re going to get a raise of over a grand a month. You’re going to keep doing this all the way through to retirement, and if you do it through a tax-free entity – say a solo 401(k) or a Roth IRA – it’s going to come to you tax-free. And here’s the kicker: when you retire and you have these notes going, and you opt to take the income from the payments, those notes are going to remain inside that entity. Which means every time one of them gets paid off, you’re going to repeat the process, you’re going to get a bigger note, and in retirement, you’re going to get a raise. This is Jeff Brown, the BawldGuy. I’ll catch you next time. See you later.

This entry was posted in 401(k)'s & IRA's, Notes, Video on by .

About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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2 thoughts on “Investing In Notes 3 — Video

  1. Greg

    If the note is inside an IRA or Solo 401k and you have to foreclose, do any and all repairs, fees, and expenses also have to come from the same account?

    Reply
  2. BawldGuy Post author

    All activity must take place from inside the plan, Greg. Income comes into it, expenses are paid out from it. No exceptions of which I’m aware.

    Reply

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