With so many innovative and ingenious ways of creating wealth, making money and accumulating riches we can be distracted and forget to start planning for our retirement. As a current professional and veteran in the performing Seller Financed Note Industry since 1991 I would like to share with you one way that you can start to build towards your retirement by purchasing Seller Financed Notes. Initially, the best way to demonstrate this retirement building method would be through an example.
Buying Real Estate Secured Notes
The property securing the note was ¾ of an acre of improved land in Hesperia, California. It sold for $30,000 with a $6,000 down payment and the seller carried back the note for $24,000 at 8% interest amortized for 10 years with a monthly payment of $291.19. When the note holder contacted me, she had already received 17 payments leaving 103 payments remaining and a current principal balance of $21,646.83.
In doing extensive due diligence I found, the buyer was a builder and had already started to build a home on the property. The buyer/payors’ credit was excellent, the title was clean, clear and up to date with no issues and the appraisal came in for much more than the sales price of the property.
I had negotiated an accepted purchase price for the note of $15,000. That gave me two options. The first option, I could sell it to one of my investors for $17,401 and make $2,401 right now. The second option, I could buy it for myself. At a purchase price of $15,000 for a yield of 18.46% I would then receive 103 payments of $291.19 and collect $29,992.18 if the note went the full term. I took the risk and purchased the note and it turned out to be a great investment.
What if it this note was purchased by my self-directed IRA? Well, it is definitely an option and you can do it with your self-directed IRA too! On the example above all of the payments would go into your self-directed IRA for you to use and invest again. Can you see the potential monetary growth that you could achieve for your retirement?
Value Investing
Value investing is the practice of purchasing assets for less than they are worth. Investing in discounted assets provides a “margin of safety” - room for error, imprecision, bad luck, or the fluctuations of the economy. It is a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk and resist crowd psychology (jumping on the bandwagon of the “latest and greatest” investment). No investment is made based on emotion or feelings. A value investment is a safe, secure investment that protects the initial investment capital and allows for a good return over time. A value investor is in it for the long term.
Successful value investors combine detailed asset research and valuation work with endless discipline and patience, well-considered sensitivity analysis, intellectual honesty, and years of analytical and investment experience. The above example has some higher than normal returns associated with it. The average Value Based Investor may typically earn on average in the 4-6% range with higher returns always possible.
Performing Seller Financed Notes are value investments (see above example) purchased for long-term passive income and/or for the growth of your Self-Directed IRA. Imagine buying one note per year or owning 10 or more notes that you are receiving payments from on a monthly basis. Wouldn’t that be a wonderful addition to your monthly retirement income in the future?
You may have to start out educating yourself as this is a hidden niche in the real estate industry. As you gain knowledge and experience you might start to think about putting some performing Seller Financed Notes in your own Self-Directed IRA. Your actions now will forecast your financial future as retirement approaches. You are the only one who truly knows what your current position is and whether or not you can take the next step of learning to broker and invest in Seller Financed Notes. Remember, success demands action! Keep on marketing, it’s going to work! TWITA! (That’s What I’m Talking About!)
Jeff Armstrong, president, and owner of Armstrong Capital, has been a note professional (investor and broker) specializing in the performing Seller Financed Note Industry since 1991. Jeff is an industry-recognized author and an engaging and requested speaker on Seller Financed Notes at conventions, conferences and events nationwide. In his free weekly email Note-able Newsletter, Jeff is well known for his realistic, straightforward, honest and fair approach to the Seller Financed Note Industry. His enthusiastic and encouraging style, as well as his step by step approach, has made his Secrets of Paper topic top rated and one of the most sought-after performing Seller Financed Note courses in the country. With over 2100 individual note transactions closed since the inception of Armstrong Capital, Jeff’s knowledge and experience in the Seller Financed Note Industry is unsurpassed.
*Mainstar's role as custodian of self-directed accounts is nondiscretionary and/or administrative in nature. This information is for educational purposes only, and should not be construed as investment, legal, tax or financial advice or as a guarantee, endorsement, or certification of any investments. Mainstar encourages individuals to consult a financial or legal professional when making investment decisions.