How To Really Do This Business
Most of the get rich quick and business opportunities that promise you will make a lot of money flipping notes sell you a bunch of fluff that is designed to make you so frustrated you will upsell the other promised packages to tell you how to really succeed in the business. Often it will cost you thousands of dollars and no guarantee it was as easy as originally promised or that you will even make money at it.
Like any business, you have to be of that mindset to make it work. You have to be willing to put in the hours of labor without anyone holding your hand telling you what to do step by step. If you need help, you most often will have to pay for it. In the beginning, you most likely will not make a lot of money until you learn the ropes and have a network established.
So if you are ready to roll up your sleeves and work, you can start here to give you a better idea on what it takes to make this business work.
The following is a realistic approach of becoming a note broker. Follow these steps:
- Go to the library and look online for all the information you can obtain on the topic of real estate notes, property laws, contracts, and your state laws.
- Write out your goals of what you wish to accomplish with this business.
- Develop a preliminary business plan.
- Save up at least $15,000 to get started properly.
- Get a business license, better yet, get an LLC (cost will range from $50-$500+ depending on your state).
- Consult a real estate lawyer and let them know exactly what you have in mind for a note buying business and follow the advice given (consultation for a real estate lawyer can be $50-$150/hour).
- Create a business plan with the help of your lawyer and have them develop all the proper contracts you will need in this business.
- Find a reliable accountant with in depth knowledge of corporate tax laws to help you with bookkeeping, expenses and tax issues.
- Get a professional web site designed for your business using the information your lawyer tells you will be needed to process the applications.
- Create professional stationary you will use in contacting people.
- Place ads in classified sections of magazines and newspapers where your note holders are likely to see your offer (like a FSBO magazine.)
- Create a radio and television ad which can be used and get the best rate to air them.
- Start contacting potential investors and sell them on the idea to work with you when you find notes and have them sign a contract of non-disclosure and agreement to pay you if they agree to do business with you. Get at least 50 ready to buy from you. Line them up first before looking for notes.
- With all the legal issues and proper business facade in place, you can now start looking for notes.
- Pay a reputable list broker for a list of note holders (names, address and phone number) who are not on the DO NOT CALL list. Start with 1000 at a time. Expect to pay $1500 or more for a good list. Or befriend real estate brokers, pawn brokers and others who are likely to run into notes on a daily basis.
- Create a post card with a message telling them you are trying to reach them and to expect your call soon. Include a link to your web site and your phone number should they opt out of your call or want to reach you immediately.
- Wait 2-3 days after the mailing and call them with your sales pitch as to why they should consider selling their notes now. Keep a record of what is said on the call. Respect wishes to be taken off your list.
- If they do not request to be taken off the list and don't want to sell now, wait another month and call again.
- If they do want more information, get the details your lawyer tells you is essential in closing the deal and have them sign a contract of non-disclosure as well as an agreement that you are the one who is posting this information to the investors.
- Prepare for a professional assessment of the note which may require paying a professional third party.
- Present your note information to your pool of investors by contacting them on the phone or in person and try to get a commitment as quickly as possible on the amount they will pay. Have them sign a contract to commit.
- Get back to the note holder with the quote. If they agree to sell, have them sign a contract to commit, tell them that they are also agreeing to let you have the next payment due them on the note and get it in writing.
- Forward all the paperwork to your investor who should have an escrow company lined up already to process this transaction.
- When the deal is done, the escrow company will forward the money to your bank account.
