CAN YOU ADD TO YOUR PERSONAL TREASURE? MAKE MONEY LIKE A BANKER

HOW DOES THE BANK MAKE MONEY? Not the way you’ve been told Checking and Savings accounts Loan money at a higher rate What kind of spread? Enough to pay big bonus? Build a skyscraper? Velocity -- the new money machine Make money on the loan payment How?

LOOK AT LOANS WHAT DOES A TYPICAL LOAN LOOK LIKE?

DID’JA EVER LOOK AT AN AMORTIZATION SCHEDULE Look at the schedule for a $200,000 mortgage How much interest is paid in the first year? ($9933) How much principal? ($2951) Are not the interest and principal payments a cash stream? What is the cash flow worth? I want money now 90% …………. 80%..…….. 30% % Depends on the value of the borrower

WHAT CAN A BANK DO WITH CASH RIGHT NOW? You want to make 15% on your money Buy the cash flow ($12,884) for $10,951. Why would a bank want to do that? Capital requirements Loan out $109, 510 Amortization schedule on $109,510? How many times can that be done? As many as the Federal Reserve lets me.

WHAT IS THE RISK? How can this all fall apart? The first person in the domino loan doesn’t pay Follow on borrowers don’t pay Why would they not pay? Lost a job Asset declined in value Can’t sell the asset

HOW CAN YOU MAKE MONEY? WILL A BANK SELL YOU NOTES?

Sure will $10,000,000 is considered a mini-bulk buy Got $10MM? There are people who do. What does the bulk buyer purchase? Face value of the note – range? Thousands of notes – which are good notes? Would you pay someone to analyze the note?

WHAT KIND OF NOTES ARE IN THE BULK PACKAGE? Will the bank sell its best notes? Yes Will the bank sell its worst notes? Yes Performing notes The borrower is making the monthly payments as of today Don’t know if they will make the payment next month Non-Performing notes Borrower is delinquent for 90 days or more. Usually a lot more

MORE NOTE DISTINCTIONS Secured notes An asset (house, commercial property, etc.) secures the loan. Paperwork is correctly recorded Secured notes cost more Unsecured Notes Typically credit card debt Your promise to pay, no one will take the purchase away Cheaper Zombie debt is the cheapest – 3 dubs

SECURED DEBT ONLY ORGANIZED TO DEAL WITH IT

SECURED NOTES Performing –vs- Non-Performing Non-performing is cheaper First or Second Lien Second Lien is cheaper We like seconds for residential property Owner occupied property Demographics Equity Secured debt does not go away

RISKS WITH SECURED DEBT Foreclosure Can’t sell the asset for market value Bad analysis Can’t reach agreement on new terms

HOW CAN YOU PARTICIPATE? NOT A QUESTION OF HOW MUCH – MORE A QUESTION OF WHEN

INVEST TO SUPPLEMENT YOUR EXISTING INCOME Invest today Expect first payment in 30 days Geared to fixed income situations Recommend performing notes Borrower is paying Borrower has a payment history Lower interest rate

WAIT A YEAR DON’T NEED INCOME TODAY Invest today Pay out in one year Geared to short term saving considerations Recommend non-performing secured note Higher interest rate Status updates on progress Might not get settled in a year Bad note

LONG TERM INVESTMENT Invest today Payout two years and beyond Geared for long term saving Recommend non-performing second or first notes Higher interest rates Compounding rates Increased loss of value Money is tied up long term

OWNING A NOTE RESPONSIBILITIES

Own an asset –> action required Send out a payment invoice with statement Send the check to your account Verify they are making their payments Must report interest payments to borrower Form 1098 at tax time Servicing costs $15.00 per month.

LEVEL OF INTEREST? Interested Not today Ready to commit Keep me on the mailing list Not interested at all