We are going to learn what cash flow notes are and how people create a sustained and continous income from both buying and selling notes. Not only can you make money buying and selling them, you can also create a business by bringing buyers and sellers together and reaping the benefits of nice fees associated with the transactions taking place between the two parties.
First, let us discover what cash flow notes are and what forms they take. Transactions take place everyday all over the world and take on differing characteristics. When you go to the market and purchased an item, in exchange for the item you have purchased you most likely give the sales clerk cash. Basically the listed price is paid in full and you walk with the item with no more obligation since you have the and a receipt proving you paid for the item. This is the simplest form of abusiness transaction. However, there is another type of transaction we familiar with which falls under the umbrella of cash flow notes.
The most notable and popular type of cash flow note is the mortgage note. Residential and commercial real estate changes hands from one party to another everyday. In most cases, these transactions are not concluded with the total cost of the property being transferred to the seller.Usually the buyer will negotiate a installment contract with the seller where the buyer will pay for the property over a set period of time. In most cases these installments will be paid over months and years until the installment agreements is paid in full at which point the buyer owns the property outright.
Most people who own a home understand the basic concept of a mortgage. Comercial and residential mortgage notes are bougth and sold by note investors to make money. Investors buy mortgage notes and create and income stream called cash flow by adding these notes to their portfolio. Seller make money selling the notes by selling the note investors for a discounted lump sum. Although the seller takes a loss on th total amount of the note he would have collected had the seller held the note until the contract was paid in full. He now has a lump sum of cash to invest elsewhere such as other properties.
Different types of Cash Flow Notes:With the most common being real estate and mortgage notes, business notes, invoice factoring, accounts receivable, structured settlements, etc.
Real estate cash flow notes are secured by real property such as a commercial building, residential house, mobile home, automobile, boat or airplane.When real property is used to secure real estate notes, a mortgage or trust deed is added. Should the borrowe default on the loan. the real property can be sold and used to collect on the debt
Business cash flow notes are secured by assets owned by the business. This type of cash flow note is more complex and usually requires the assistance of a financial advisor. There are different types of business cash flow notes including: seller carry back notes, purchase order funding, and factoring.
Structured setlements are financial instruments used to compensate individuals who have been injured due to the negligence of an individual or organization. This type of cash flow note is secured using annuity payments.
