A Primary Purpose Of A Cash Flow Budget Is Cash Flow Notes For Sale – Are They a Safe Investment?

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Cash Flow Notes For Sale – Are They a Safe Investment?

Cash flow notes for sale include a variety of opportunities for both buyers and sellers. Currently, more than 60 types of cash flow notes exist. The most common include real estate notes, land contracts, business notes, structured settlements, and seller carry back notes.

Cash flow notes used to document real estate transactions are secured by tangible assets. Almost any type of property can be used as collateral, including single and multi-dwelling properties, pre-fabricated or mobile homes and condominiums. Investing in real estate notes can be somewhat risky. Experts recommend consulting with a real estate attorney to ensure the proper legal documents are executed. Given today’s depressed economy and housing crisis, investing in real estate notes should be carefully considered.

On the flip side, remember that real estate has always bounced back from previous financial turmoil. Investors willing to wait it out can reap substantial returns on their investments. Business notes are another popular choice among investors. The three primary cash flow notes in the business sector include factoring, purchase order funding, and seller carry back financing. Everyone uses business assets as collateral for funding.

With factoring, accounts payable to the business is used to secure the note. Receivables are sold to a source of funds known as ‘factors’. An entity can be a private investor, a group of investors, a bank or other lending institution. Purchase order funding uses the same principal as factoring. The only difference is that upcoming buy orders are used as collateral. Seller carry back financing is moving to the forefront of cash flow notes for quick sales. Seller carrybacks can be used to fund real estate or business transactions. Due to the current credit crunch, more investors, business owners and property owners are turning to owner financing. Seller carry back goes by many names, including “owner carry” and “owner financing.”

In essence the owner finances all or part of the contract to close. Some owners finance 20-percent of the purchase price, while others will finance 100-percent of the deal. Seller carry back notes can be sold to investors. For example, Sam Smith owns a business valued at $1 million. The business sells to Joe Jones and returns a 50-percent note, or $500,000. Sam Smith can then sell the note to a private investor and assign payment rights to all or part of the note. It is possible that Sam will not receive 100-percent of the note’s value. However, he could get a lump sum of cash instead of waiting years for repayment. A real estate investor can pay Sam $750,000 for his $1 million cash flow note. Investors now bear the risk and must collect the payments. They should wait for repayment unless they sell the note to another investor; Which is unlikely. In the end, the investor will receive a profit of $250,000, plus any new asset value.

Many investors appreciate the value of structured settlement cash flow notes. Structured settlements are used to compensate individuals who have been injured due to negligence, as well as lottery jackpot winners. Structured settlements are paid for through annuity payments supported by life insurance companies. Annuitants (the individuals who receive the payments) can sell all or part of their structured settlement to the investor. To sell annuity payments, annuitants must obtain authorization from the court.

A judge must prove a genuine need to sell a structured settlement. Structured settlements are usually arranged to provide individuals with a consistent cash flow for medical expenses and healthcare. Judges usually do not approve the sale of a structured settlement if they believe it will cause financial harm to the annuitant. Buying and selling cash flow notes can be beneficial for both parties. However, it is imperative to work with a reliable professional and obtain the proper legal documents. Doing so will help ensure profitable investment opportunities.

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