Posts Tagged ‘annuities’

Cash Flow Notes

What Are Cash Flow Notes

Cash flow notes are documents or contracts with a promise to pay, the terms which include the amount, the interest rate and the length of time.  Examples of a cash flow note would be a mortgage, a trust deed, a deed of trust, a business note, a court award (such as a structured settlement), lottery winnings, annuities, etc.  Other examples would be personal notes, personal loans etc.

How Can I Make Money with Cash Flow Notes

Every cash flow note has an inherit value based upon the terms of the note or contract.  The frequency of payment, length of payment, interest and principal balance all come into play.  The first way you can make money with cash flow notes is to sell your cash flow note.  Let’s use an example, say you have sold a home to someone and you actually financed the sale yourself using an owner financing option because the buyer could not qualify for financing through a bank.  The home was sold for $200,000 the buyer put down $20,000 so he owes you $180,000.  He is paying you an annual interest of 8%, the loan is amortized over 30 years (360 payments) paying you $1500 a month.   That means over the life of the loan you will receive $540,000.  It is possible to sell your cash flow notes on the secondary markets to investors at a discount of their future value and receive a lump sum in return.  If it is a good risk you may be able to sell the cash flow note for more than the principle balance owed, if it is risky and does not have a good payment history you may have to accept less than what is owed

How Are Cash Flow Notes Valued

Cash Flow Notes are Valued in many ways using complex mathematical formulas.  A dissection of which is beyond the scope of this article.  Ultimately a cash flow note is valued based on the income stream it can produce and how long that stream will continue.

Can I Make Money by Brokering Cash Flow Notes

Yes, it is possible to actually make money by connecting sellers with investors of these notes.  Essentially you are acting as a facilitator and you can get a piece of the deal for bringing the parties together.  This is typically where you will here advertisements about making money in the cash flow business.  It is possible, very lucrative but also there is a great deal to learn and success will not come over night.