by Dave Butler
By far, the Number 1 question we get from new people entering the cash flow business is always the same: “How do I get started!” That question invariably goes right to the Number 2 question:
“How do I find notes?” Not bad questions… but there are several problems in trying to answer them.
First, these two questions are much too broad to provide a simple answer for. Second, while there are many answers for both questions – these answers cannot possibly account for personality and/or circumstances for each individual. As a result, nobody can tell which of these answers is the absolute “bullet-proof” best answer for YOU, where you’re at, with what you’ve got going on in your life!
But what we can do is provide you with a fundamental By-The-Numbers roadmap that allows you to simply connect-the-dots, and determine the best way for YOU to start out on YOUR OWN cash flow business; and to select the best ways for YOU to find notes to work with. In this regard, there are some relatively simple answers for beginning our efforts!
There are only four things that YOU need to understand at the outset, to quickly connect-the-dots to successfully launch YOUR note business. These are the building blocks you need, listed in the order in which you will need to apply them:
♦ Education – a basic understanding of the note business itself, the basic deal mechanics that are involved in the various cash flow niches we operate in, and how to package and present notes we find to investors;
♦ Marketing – outside of a commitment to constant learning, the marketing function is the primary ongoing business activity for any cash flow professional. Without question, effective marketing is the primary determinant for success or failure in the cash flow business (indeed, as it is for all business enterprises).
♦ Budgeting – Like with all businesses, you’ll have to spend some money to succeed in the note business. How much money is determined by your marketing plan, and your personal limitations. You must prepare a well thought out budget that allows you to do the critical and necessary marketing at whatever level fits your financial abilities.
♦ Determination – Full-time, or part-time, you have to work the business as a business, not simply as a “hobby”. You need to dedicate your efforts to providing results that will satisfy your customer’s needs. It will help immensely if you actually enjoy the business. If you enjoy it, you will find that you learn the things you need to know much easier, and you will enjoy the continuation of the learning process during your career.
So How Do I Start Then?
A lot of folks seem to think a great shortcut for succeeding in the note business, is to simply go out and find the notes! While the marketing function will be deciding factor in determining your long-term success as a note finder – out of the above four elements, the education factor will ultimately determine whether or not you even get out of the gate… and how far you go in the race for success. So learning The ABC’s of the cash flow business is the place to start! This basic “note-knowledge” in turn, is the linchpin of the second question.
How Can I Find Notes?
The reality is, initial success is truly built on: What you know; Who you know; AND Who knows THAT you know, WHAT you know!
A huge part of effective marketing is educating your customer base and referral sources… so, if you don’t know enough about what you are doing – how can you demonstrate what you know to anyone else? Having a basic understanding of what you are doing, and how you are doing it, is the whole basis of what you promote, and how you promote it! You are the whole package.
The old “Knowledge Is Power!” bromide still has a lot going for it. But it is probably more accurate to state, “Knowledge is Value”. Like all values, knowledge isn’t very useful without concerted action in the marketplace. Nothing has value to anyone unless they first, know about it, and second – that they recognize the benefit it has for THEM.
So… if you go into the marketplace without any kind of basic knowledge about what you do, and how it can help the people you are marketing too – what is it exactly that you are trying to market? What is your value proposition? What is it you are bringing to market, that somebody will pay you for???
How come I always heard I could “Earn While I Learn???”
Don’t confuse that with “Earn BEFORE You Learn”! Big difference. The thing is, if you don’t learn anything first, what can you possibly bring to the marketplace that somebody will pay you for? And, if you have no idea at all about what value you are bringing to the marketplace, how can you even tell somebody about it – or more bluntly… how will you find notes, and how will you know them when you see them???
You don’t need to have some kind of “full-service”, “fully-credentialed” note business. All you have to do is find notes… and find out all you can about those notes! Here are some powerful “Rules of Engagement” to operate by:
First, remember that the cash flow business is about buying and selling “cash flows”. So… the basis of ALL cash flow buying ALWAYS boils down to THREE very simple, basic things related to the note that offers the cash flow:
1. how much will the note holder receive,
2. when will they receive the monies,
3. the desired yield the investor will require on the funds invested, to buy the note
Your role as a note broker is to provide the clear, concise information on EXACTLY what the cash flow is, how it is secured, and the suitability of the property and the payor. Your role isn’t to make a decision on that information (though you’ll quickly become skilled at this).
Once you’ve recognized the first “rule” above, the second rule immediately becomes clear to you… “the process is always the same, for every cash flow note, every time”…
1. Gather complete information on a worksheet
2. Test the information to verify accuracy (especially the numbers and dates)
3. Package the information in a clear and concise presentation that tells investors what you have for sale – EXACTLY… in a format he can make a decision on in 10 to 15 minutes tops.
4. Present the information to investors
Using the above as your absolute Rules of Engagement makes everything very simple, and direct. That’s as EZ as it gets.
Dave Butler is a 29 year veteran of the private note industry and real estate investing. He has assisted countless brokers trying to start their own note brokering business and is the author of several cash flow industry books.