34 Ways to Improve a Note

So you decided to get into the note investing game via buying non performing notes or performing notes. Now let us look at 34 ways you can improve a note.

Improve Your Promissory Note – Early Payoff

1. Early Payoff

Many times a note is paid off in full in advance of the time that it is scheduled to. The average life of a 30 year loan tends to be 7 to 10 years.

2. Early Payoff with a Discount

Offering a small to large discount will many times entice a person to pay a note off early. Example, buy a $10,000.00 note for $6,000.00 and have the payor pay it off for $7,500.00.

3. Early Payoff Refinance (Them)

If the payor doesn’t have the cash, show them how they can finance the property and even lower their payments by taking advantage of the discount that you are offering them.

4. Early Payoff Refinance (Investor)

If the payor of the note lacks the ability to finance the property, you or another investor could finance the property by co-signing for the payor or by taking title, financing and then re-selling to the payor on a wrap.

5. Early Payoff Discount Underlying

You may be able to negotiate a discount on underlying loans as an enticement for an early payoff on your note.

6. Early Payoff Over-finance

By financing more than the amount needed to pay off your note at a discount, the payor may be able to pocket some cash.

7. Early Payoff Over-finance – Invest the Difference

The payor could finance more than the amount needed to pay your note off at a discount and the difference can be invested in some paper. The net result to the payor is a discount on his note and a lower net payment as well as the ownership of some good paper. The result to you would be a profit on your note as well as a commission on the sale of another note to the payor.

8. Partial Payoff Partial Subordination

For a partial payoff on the note the investor could agree to subordinate to new financing. The investor’s yield (rate of return) on the cash investment he has in the note would increase dramatically.

9. Partial Payoff Lower Interest

In exchange for a partial payoff the interest rate and payment could be lowered. The cash investment in the note would have a very good yield.

Improve Your Promissory Note – Restrucure Terms

1. Lower Interest Raise Payment

The payor raises his payment in exchange for a lower interest rate. The investor’s yield increases substantially and the payor saves a great deal of interest charges.

2. Lower Interest Graduate Payment

In exchange for a payment that increases each year, the rate is lowered. The payor saves interest and the investor increases his yield and cash flow.

3. Graduate Payment – Eliminate Balloon

For a gradual yearly increase in the payment, the investor will eliminate a balloon payment, which will also increase his yield.

4. Graduate Payment – Shorten Amortization

The payor may agree to a gradual yearly increase in the payment just for the difference it would make in the length of the loan and the amount of interest it would save.

5. Raised Payment – Pop Balloon

A balloon payment could be eliminated in exchange for a raise in the monthly payment.

6. Raise Payment – Balloon Extension

In exchange for a raise in the payment, the balloon payment could be extended for a longer period of time.

7. Wrap Your Loan

The payor may be in need of cash or may be behind in payments and you can loan the money in exchange for increasing the rate slightly on the entire note.

8. Bad Note – Fix Terms or Clauses

There is a great deal of potential in changing bad terms or clauses of a note. Many undesirable notes can become very desirable with minor modification. Most of the time it is a win-win situation for all involved. If a note has a problem, don’t look at it as a negative point. Could you buy the note and change the clause? Be sure to negotiate before the purchase.

Improve Your Promissory Note – Collaterizing/Financing

1. Collateralize – Financial Institution

Banks and other financial institutions will loan against paper. They may loan more than the cost of the note and at a lower interest rate. That means 100% financing and a positive cash flow.

2. Collateralize – Investor

Another source of financing is with private investors. One on one transactions and syndications are used to fund paper.

3. Collateralize – Partial Interests

Several investors can be sold partial interests in a note. This can amount to 100% financing of the cost of the note and an interest in the note left over for you.

4. Collateralize – Seller

If the note seller doesn’t need all cash, you can give him part cash and a note secured by his own note or by another note or property. This way you can give him a higher price and still get the yield that you need.

Improve Your Promissory Note –Trading (Collateralizing)

1. Trade – Real Estate

By buying notes at a discount and then trading them or using them as collateral at their full face value, you can effectively buy real estate at very deep discounts (20 to 45% below market value).

2. Trade – Personal Property

You can also trade paper at face value for all kinds of personal property such as cars, boats, etc.

3. Trade – Face Value for Discounted

It is also possible to trade good paper at face value for less desirable paper at a discounted value. Expertise in dealing with notes, collection procedures and solving problems can turn that note into a more desirable note.

4. Overtrading – Bank

Using the spread in the interest rates to make you a profit and solve a problem for your banker is what is involved in this technique. The banker makes you a loan secured by paper that you own or are acquiring and in exchange you buy some of his repossessed merchandise (which ends up free to you).

Improve Your Promissory Note – Underlying Loans

1. Wrap Underlying – Reinstate

If your loan of an underlying loan is behind in payments, that can be the opportunity to advance some money at a high rate of yield. It can occur by “wrapping” the underlying loan or loans at a higher rate of interest.

2. Wrap Underlying – Loan Money

If the payor is in need of cash, you can loan them money and use that as an opportunity to wrap the underlying loans and increase your yield.

3. Buy Underlying – Bank

The most ideal note for you to try and buy is the one that lies beneath any note that you already own. Even banks will occasionally sell notes at a discount. It is always worth asking about.

4. Buy Underlying – Private

Always contact any private note holders that own a note that is on a property that you have a note on.

5. Refinance Underlying – Discount

Negotiate a discount with underlying loans and then finance the property. You can then sell it back to the payor on a wrap-around. Possibly at better terms than he already had.

6. Refinance Underlying – 100%

In refinancing the underlying loan or loans, you may be able to finance out the cost of your note also, so that you have all of your cash out of the property and still have a profit coming in from the note (the wrap).

7. Refinance Underlying – Over-finance

You might also finance the note and underlying loans for more than the amount of your cost on the note. It could be possible to walk away with cash and even share some with the payor or lessen his terms in some way.

8. Refinance Underlying – Lower Rate

Many times it is possible to refinance one of the underlying loans at a lower interest rate and better terms than presently exists, especially in the case of second loans. Profits in cash flow or cash could be shared with the payor.

9. Refinance Underlying – Partial Pay – Lower Interest

In refinancing underlying loans, you might be able to get a lower interest rate and also some of your cost of the note back.

The chart that follows is what I call the P.A.M. chart, which stands for Paper Analysis Matrix. When I buy or an considering buying a note, I analyze it using the chart and what possible techniques are available to improve the note.



21 Free Google Tools for Real Estate & Note Investors

  1. Google Docs for your Note & Real Estate business paperwork
  2. Google Sheets to Analyze your note and real estate deals
  3. Google Slides – For presentations to homeowners or investors
  4. Google Forms – To capture leads on your website
  5. Google Keep – To Keep you Organized
  6. Google Drive – To Store all your documents
  7. Google Voice – Free Voicemail and a call tracking number
  8. Google Calendar – To Organize your time
  9. Google Translate – If you need to translate your documents
  10. Google My Business to help people find you in your local market
  11. Google Sites – A Free Website
  12. Blogger – Another Free Website
  13. Google Adwords – Pay for Website Traffic
  14. Google Keyword planner to figure out what people are searching for related to real estate and notes
  15. Google Analytics to see how many people are coming to your website and where the come from
  16. Google Data Studio – Analyze and Visualize your analytics data
  17. Google Search Console to find out of your website is functioning correctly
  18. Google Tag Manager to insert the google analytics and other tracking code on your website
  19. Google Books some amazing free education on many topics
  20. You Tube (Owned By Google) – Maybe the best way to start generating leads online in your local market.
  21. Google Mail – A really good free email service

Links to Google FREE Tools

  1. Google Docs (Just Like MS Word but FREE)
  2. Google Sheets (FREE Excel)
  3. Google Slide (Powerpoint)
  4. Google Forms
  5. Google.com/Keep
  6. Google Drive
  7. Google Voice
  8. Google Calendar
  9. Google Sites
  10. Google My Business
  11. Google Tag Manager
  12. Google Adwords
  13. Google Keyword Planner
  14. Google Analytics
  15. Google Data Studio
  16. Google Search Console
  17. Google Translate
  18. Google Books
  19. Blogger
  20. You Tube
  21. Google Mail

Fractionalized Trust Deeds

Sale of Series of Notes or Undivided Interest In A Note

Pursuant to California Business and Professions Code § 10229, private investors may purchase undivided interests in single notes secured by the same property. Referred to in the industry as multi-lender transactions or fractionalized loans, this statute allows brokers to make available the following:

Larger and more secure loans for their private lenders,
The opportunity for lenders to buy fractionalized interests in notes and trust deeds,

Multiple-lender loans are often considered to be more secure than single lender transactions, in that they are more carefully monitored by the California Department of Real Estate. Whether or not a broker meets the “threshold” criteria, once they make or arrange their first multiple lender loan, a report of the transaction must be submitted to the Commissioner of the Department of Real Estate. Included with the submission is a report of trust fund activity and acknowledgement by the broker to submit such trust fund activity reports on a quarterly basis. Additionally, loans made or arranged under the multi-lender law must meet the loan-to-value ratios set forth in the statute.

Multiple lender loans may accommodate up to ten lenders (husband and wife are counted as one) in such loans. The major criteria is that notes or interests of the purchasers must be identical in their underlying terms, including the right to direct or require foreclosure, interest earned, etc. The degree of ownership is determined by the percentage of interest purchased, i.e., if the principal amount of a given note is $200,000, and $40,000 is invested, the investor owns a 20% interest in the transaction.

Multi-Lender Loans Offer Opportunity For Diversification

By investing smaller amounts in a number of fractionalized transactions investors effectively diversify their trust deed investments. Participating in such fractionalized notes gives a lender the opportunity to invest in several notes as opposed to waiting for a single loan that matches the amount of available investment funds. By so doing, investor money can be put to work immediately, thereby benefiting them from the higher returns offered through deeds of trust.
When trust deed lenders spread their investment funds over several trust deeds, as opposed to an investment in a single note, they spread the risk. Even if a loan is in default, chances are that the other loans will still be performing.

Invest Your IRA Contribution

If you have a self-directed IRA account, you can invest your annual contribution in high yielding trust deeds. A number of brokers accept investments as small as $2,000.00.

In Conclusion

Suffice it to say, multiple-lender transactions have become a popular investment medium. For the investor, it allows for smaller investments, more qualified borrowers, more marketable collateral and more predictable cash flow. By investing in several trust deeds, the investor has income from more than one source. Accordingly, if one borrower is late or in default, the investor still has cash flow from other notes.

Why Should I Invest in Trust Deeds?

The real question is “why not?”

Will hard money trust deed investments always be available to the private lender – maybe not? The brains on Wall Street are just learning what you have known for years. Namely – hard money or so-called “sub-prime” junior loans can be among the most profitable investments on the street. Even investments in loans secured by junior trust deeds, to borrowers with impaired credit, are sought after products by the secondary market. When we say secondary market we’re not talking about private lenders. We’re talking about the heavy hitters like giant banks, insurance companies and major corporate entities. They buy up these impaired credit loans, create mortgage pools, and sell them back to you as mortgage backed securities. And you must know if the yield from the pool is 12%, you’ll get something significantly less.

Suffice it to say, sub-prime or hard money loans are still one of the best investment opportunities available to the private lender. Compare the yields and the collateral with that of other income generating investments. It’s no secret – those who have invested in stocks and bonds are in pain. Not only were losses incurred from investments in prime issues, but yields from treasury bills, federal agencies, mortgage backed securities and other related instruments now range from 3.56% to a high of 5.5%. On the other hand, interest returns from hard money trust deeds are between 10% and 14.5% and the collateral securing these investments is valuable real estate.

A few years ago there was an erosion of equities resulting from declining real estate values and some losses were incurred. Most were in yields rather than principal. Even under those circumstances, many investors still earned from 6% to 7%. Not so bad when you consider the rough and tumble ride experienced by investors in stocks and bonds.

When you consider the high yields and high degree of security offered by the well placed junior trust deed, is it any wonder why Wall Street has taken so kindly to impaired credit loans secured by real property? The return from trust deeds is more controllable, and is not subject to the up and down fluctuations of the market. The security is also considerably better since each trust deed is secured by real estate with a sound margin of protective equity.

What’s left over for the private lender? Not much – unless you start favoring the brokerages whose only business it is to find you good loan products. It’s hard to believe, that just a few short years ago, private lenders dominated the hard money trust deed market. Henry Swift and Company, a well-known San Francisco investment and research firm, identified mortgage brokers as “California’s new banking industry.” According to their findings, private lenders funded $50 billion of mortgage loan products. Today, banks and savings and loans have taken over a large portion of that market.

Now for the good news. Good mortgages are still available from the broker with whom you are already doing business. Take advantage of these high yielding investment opportunities and contact your broker for a current list of the loans in his inventory.

5 Ways to Make 10% Return

We all need a higher rate of return than the banks are currently, what better way than Investing in Real Estate ad Business Notes. Here are some ideas that you can employ

1) Invest in yourself
2) Early mortgage payoff
3) Invest in a note
4) Buy from a broker
5) Buy a partial


1) Invest in Yourself 
If you think education is expensive, try ignorance! There is no greater dividend that will ever be paid than your return on your investment in education: Provided it is the right education. What is right? It’s education that teaches you how to excel, make money, negotiate, be creative, take calculated risks and strive to get ahead. Education that teaches you how to work for someone else and put in just enough to get by is detrimental. Education from someone who has never left school and faced the real world should always be questioned.

2) Early Payoff on Mortgages
It's a simple mathematical conclusion that if you have money invested at 6% and are paying on a home or rental mortgage at 10%, it doesn't make sense. Yet in many cases, people don't see the scenario clearly. If you have any long-term money invested at less than your home or other mortgage, use the money to reduce the mortgage. What is a little more obscure is that you can make monthly contributions to paying off high-rate loans with a simple phone call to the lender. If you pay an extra $100 each month on a 10% amortized mortgage loan, the $100 goes directly towards principal and pays your home off years earlier. What is your risk? None! Debt reduction
is a guaranteed rate of return.

3) Invest in a note
Investing in discounted mortgages can offer safe rates above 10%. If you know how to do the simple paperwork or have a consultant or team of pros that can do the work for you, it can be a safe, simple process. If you don't have the skills or have an associate that does, contact me
for information on the National Note Franchise office in your area that can help you do the "due diligence" and put together a professional package on the mortgage for a reasonable

4) Buy from a broker
Many note buyers in the marketplace are brokers who buy a note at one price and sell at another. You may be able to achieve an attractive yield by buying from them or investing with them. Due to a few brokers out there being "ethically disoriented" you must use caution and review
their packages, data and representations carefully. There is a large distinction between investing in already existing mortgages with a discounted mortgage broker and originating new mortgages with a loan broker. The latter carries a greater degree of risk and greater need for verifying the documentation, supporting values and data.

5) Buy a partial

In cases where a note seller needs a small amount of cash, doesn't want to take a large discount or your investment funds are limited, the purchase of a "partial" can be a good option. Buying a partial involves the purchase of less than a full interest in a mortgage. For example, a $10,000 / 10% / 30 year note would have a payment of $87.76 per month. To purchase this note at a 20% yield would cost $5251.87. Buying a partial could be as simple as buying half of the note. Let's say we purchase the first 15 years of payments for $5,000. Our rate of return would be 19.99% on our investment. Partials can be a powerful tool. There are also strategies where you buy the latter portions of notes (Tails).


“Henry, there is a man on the phone and he is very upset” said my secretary.

“What is his problem”, I asked. “He’s yelling about the book you wrote about Teeny-Boppers”, she said. “Teeny-Boppers? “Oh well put him on”.

“Henry Dvorken, may I help you?” “Are you the man that wrote that book about Teeny-Boppers?” “I think it is disgusting”. “Have you read the book sir?” “No, but I heard about it”. “Sir I wrote a book call Sallee-Bop-TB, it’s about. . .’ “That’s the one, a book about a Teeny-Bopper named Sally”.

After a long conversation I was able to calm my caller down and convince him I was not a pornographer. I offered him an opportunity to come by my office and look at the book. He declined but did agree he must have been mistaken if I had made that kind of offer. The world is strange sometimes.

People who have read my book ask me about risk. I have done over 30 deals, and have had five problem cases. Three were solved by resale at a profit, one needs to be rehabbed before it can be sold, and one is in contract and will be closed by the time you read this article. Let me tell you about my 14th street deal.

Minerva Cantu said she needed cash  for medical treatments for her daughter. It turned out she didn’t have a daughter, but that’s another story. Anyway I purchased her property (on the tax rolls for $19,950.00) for $11,500.00. If you’re from California multiply by 4 if you are having trouble with my Wichita Falls, numbers. If you’re from Arkansas divide by 2. We entered into a sale-lease back-option back agreement in February of 2003. Ms. Cantu was to pay $300 per month including $90 per month for Taxes and Insurance escrow; everything was great until she missed the September 2005 payment. We never could get her on the phone, and certified letters were returned. After 3 missed payments we started an action to evict her from my house. A constable served the notice.

I received a phone call from a very worried young woman. She introduced herself as Jennifer Solis, and explained she was purchasing the property under a Contract for Deed and had lived there since September of 2003. Cantu had sold a house she didn’t own to this unsuspecting young woman. We held a meeting and I agreed to sell her the house and carry the note at the same price as she owed Ms. Cantu. If Cantu had been timely with her payments, she could have exercised her option and  repurchased the house for $9,800 cash. The new note is at 9% for $17,700.00. Sixty-seven payments of $340.00 give me a yield of 35.84% if I use the cash option price.

My investor is pleased to see her payments start again. She agreed to renew and extend her note in return for a greater payment and a new interest rate of 8.5%. I will have Helen Aldrich paid off in 29 months. In the meantime I receive a net of $50.00 per month cash flow and will receive an additional $12,920 from Ms. Solis after I have paid off Mrs. Aldrich.

The title of this article is not quite correct. Ms. Solis is happy, I am happy, Mrs. Aldrich is happy. Only Ms. Cantu is unhappy. She tried to pull a sneaky and didn’t get away with it. Oh well “truth will out” as they say.

Sallee-Bop-TB is about using the commercial real estate technique of Sale, Lease-Back-Option-Back to buy SFR’s for 60 cents on the Dollar and have management free cash flow. The book is available (see the product link above).

The names have been changed to protect the privacy of the people involved

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