July 2006
New
This Issue
Back
Issues
Educational
Business Note Seminars Planned for 2007
Over the years you
may have had the
opportunity to participate in one of Ed Lisogar's numerous
speaking engagements.
Whether at The Paper
Source, Noteworthy, Cash Flow or one of the many financial conventions
across the country, Ed's no nonsense approach to all facets of the cash
flow industry guarantees standing room only sessions that are both informative
and entertaining. But make no mistake…the bottom line is knowledge…and
an expedited road to success for all of National Capital's associate
brokers.
A respected author,
Ed has written two books for brokers new to the cash flow industry.
In 2000, following years of demand for detailed information on the topic,
Ed released his critically acclaimed best seller:
"The
Business of Business Notes"
…the only
instructional manual on the market devoted specifically to the high
profit arena of buying and brokering seller financed business notes.
Don't
take our word for it...see what industry professionals are saying about
this ground breaking instructional manual!
Now you can spend
an entire day with one of the most dynamic instructors, lecturers, authors
and public speakers in the cash flow industry, participating in a hands
on discussion of the fastest growing segment of the cash flow industry.
Whether
brokering for fees or buying for yourself, this exciting one day session
will provide:
- A beginners
"walk-through" of how business notes are created
- Recognizing
salable business notes…"stop wasting your time!"
- Marketing for
business notes/The secret "hiding place"
- Building a
referral base for business notes
- Negotiating
with the seller/understanding different options
- Actual written
presentations from successful acquisitions
- Copies of typical
business note security instruments
- What to watch
out for when buying your own notes
- Secrets to
minimizing the discounts
- Due diligence
checklists
- Purchase Agreements
In addition…All attendees will receive:
- Classroom workbook
with all instructor material
- $1,000 commission
bonus good on the first business note closed with NCC
- "One-on-One"
e-mail mentoring with Ed Lisogar for six months
- Plus…as
an added bonus all attendees will receive a copy of his best selling
manual and software "The Business of Business Notes", the
only step by step program in the industry devoted specifically to
the fastest growing segment of the cash flow industry, a $129 value
in itself.
The
full day and all of the added bonuses
are included for only …$249!
Register
"On Line" from the Seminar tab
at the web site
Think of it…the
$1,000 commission bonus alone makes the one day session free! The workbook,
the manual & software package and e-mail mentoring are all literally
provided at no charge, not to mention the value of an entire day together
with the leading authority on this high profit cash flow! The benefits
of this rare opportunity speak for itself. The commission bonus, the
book, the software and the mentoring aside, you'll learn first hand
(and at literally no cost), the secrets of this industry leader; the
closing methods they've developed that's achieved a 60% "kill ratio,"
the marketing programs that provide an endless stream of referrals,
and most importantly, how Ed's been able to rocket from "green
broker" to leading industry funding source in just four short years.
Seating at each city is limited, register
today "on line" or by sending your $249 check, payable
to National Capital Corporation, to:
National Capital
Corporation
Main Office-3605 N. 68th Street
Scottsdale, AZ 85251
Feel free to contact
Ed personally by e-mail at info@nationalcapitalcorp.com
with any questions you may have about these exciting one day sessions.
*
Don't take our word for it...see what past attendees are saying about
this powerful session!
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New
Aggressive Rates for Commercial RE Paper
NCC is aggressively
seeking commercial real estate paper nationwide. Our best pricing will
be investments up to and including +/-$1,000,000. Larger notes
will always be considered.
“Challenged”
credit, scratched and dent properties, even some second position mortgages
are all of interest.
Utilize the real
estate worksheet located “on line” at the Worksheet
page here at our site.
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Business
Notes in the New Economy
As
the secondary market surges ahead into the age of the internet,
E-Commerce and computer EVERYTHING, we receive a lot of requests to
consider business notes secured by industries and service related companies
involved in varying facets of the cyber world. Historically most business
notes were created through the sale of a retail outlet, manufacturing
business, service industry, etc., businesses with something tangible
that could be foreclosed on.
However, we are
seeing more and more service related businesses LIKE a Dot Com that
come with little to no security in the form of hard assets. Still, as
has been the case for a decade in the business note arena, many of the
same issues that concerned us on a "Ma and Pa" business note
in the pre E-Commerce era are still a major concern today as we evaluate
a business note, corporate buyout, merger and acquisitions, etc., such
as:
Longevity
in Business
How long a business
has been open and operating speaks volumes about its potential to be
around AT LEAST as long as there are payments remaining on the note.
A strong pay history tells us that he is obviously comfortable with
the business and knows what he's doing. A business, ANY business that
has recently opened its doors has yet to generate a loyal clientele.
There's no telling whether or not the concept will be accepted by the
consuming public. The "Dot Com" blood bath is a good example.
Still not convinced? Attend a Silicon Valley "Pink Slip" party
and talk to the thousands of unemployed that thought they had it made
just months before. "Boomers" driving "Beemers"
now arrive on Go-Peds.
Generally we like
the business to have about three to four years of operating history.
We can review its corporate tax returns for the two to three years prior
to the sale and ascertain if it was a profitable venture or if the Buyer
took over a sinking ship. This is even more crucial in any hospitality
industry notes (restaurants, deli's, bars, etc) where word of one bad
meal can spread like a wild fire killing any hopes of success.
Business
type/Collateral Security
Different business
types come with a variety (or lack thereof) of collateral securing the
note. While we appreciate that in the event of a default the "stuff"
securing the note will be worth pennies on the dollar at a local auction
house anyway, we still like to review notes with SOME level of tangible,
foreclosable chattels as security. An e-commerce business likely has
little to no assets other than a few used computers and a couple phone
lines. In many cases even e-commerce businesses that actually HAVE a
product keep very little in inventory, ordering on an as needed basis.
Many of you may remember the on line auto insurance company business
note that circulated for almost a year before disappearing. We saw it
two to three times a day at one point...it was really being shopped.
The seller boasted that the new business was sure to explode, that the
buyer got in with little down, there was no inventory involved or required
and he was working it out of his spare bedroom. Wonder if he noticed
his toes disappearing as he kept shooting himself in the foot?
Professional businesses
like Doctors, Chiropractors, Attorneys, etc. are okay, assuming we have
a comfort level with the Buyer, and they're experienced in the business
in question. A seasoned, veteran Doctor who patients have been with
him for years may not approve of the new, young intern that just bought
"Doc Brown's" practice. That could kill the business before
he gets a chance to prove himself. There goes the note. So a little
seasoning would speak volumes about the strength of the note.
Businesses with
little to no collateral must have some other mitigating factor to entice
us to consider it for acquisition. That leads us to our next point which
is:
Payor Financial
Strength/Equity/Credit History
A buyer that contributes
a sizable cash down payment tells us that there's a good chance they
did a lot of research on the business, that they have confidence in
their ability to operate the business successfully, may have experience
in this TYPE of business and that they have a serious monetary (as well
as psychological) investment in the business and it's success. BUILT
UP equity (through pay history and seasoning) is not the same. THE BUSINESS
makes the monthly payments, it really doesn't come out of pocket. A
buyer that gets in with little to no down can run the business for a
year or two, develop financial trouble and say to himself, "well,
it was a nice run, I paid myself a nice salary, made some money but
now its over". All he has to lose is his credit record which, unfortunately,
too many people these days could care less about. As you'll see at our
web site (www.nationalcapitalcorp.com) there are minimum cash down payment
requirements for these high risk notes.
Also keep in mind
that "Credit" is not an indication of financial strength.
An immigrant in this country for three months can have a high credit
score but own nothing. We implore business brokers to make personal
Financial Statements part of the qualifying process for their selling
clients. A buyer is not obligated to provide one piece of information
about himself just because the seller now wants to sell the note. The
same goes for the financial status of the business in question. We advise
sellers and their brokers to include a clause in the Purchase and Sale
Agreement for the business that the seller can request year to date
P&L's at least twice a year. While this is a great way for the note
holder to protect his investment and possibly see signs of things to
come if the Buyer is having trouble, most balk at the idea or feel they
will be "imposing" on the Buyer. Unbelievable. The Buyer owes
you thousands of dollars and protecting your investment is imposing?
Business Assets: The business must have serious, tangible,
liquid assets. While we prefer to be in a perfected first lien position
we'll occasionally accept a Junior position depending on the size of
the Payor's company and their financial strength. Hopefully the business
has a Dunn and Bradstreet number we can review. Last couple years of
corporate tax returns and year end P&L's will be required as well.
We need to ensure the Payor is strong and that they are not heading
in the wrong direction.
All in all the face
of the Business Note arena is changing in ways that provide increased
opportunities for the savvy broker. HOWEVER, as has been the case for
years, maximizing your efforts and profit potential hinges on your explaining
to your clients HOW the game is played, what the underwriting criteria
will be and most importantly, how SIGNIFICANT the discounts can be.
A full will ALWAYS be the worst way for a seller to go. Persuading your
clients to look at the creative "options" you (through us)
can provide and then zeroing in on their IMMEDIATE cash requirements
will increase both your kill ratio and bank account.
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Working
With Realtors Made Easier
By Dee Jones,
D D Jones Funding, Inc., LaGrange, TX
Are you considering
working with realtors when developing your mortgage note business? The
following suggestions should help in contacting them, setting the necessary
appointments and following through with the training. You must keep
in mind that realtors are usually very busy and will, at first, not
want to hear what you have to say. To overcome this, try the following:
1. Send postcards
with the message that you are offering a “FREE” training
on how they can sell more properties and earn more commissions.
2. Phone them, or
visit the office, and reference the post card. “I am following
up on the post card you received recently concerning how to earn more
commissions when selling more properties”.
3. Offer to hold
the “FREE” training for only 5 of the most qualified realtors
in that office. All realtors like to think they are the “most
qualified” – so you could offer to hold a second meeting
at a later date for another group.
a. This meeting
will take 20-30 minutes during the lunch break and will be held in
the realtor’s conference room, so those attending will not have
to travel.
b. You will bring
lunch for the attendees.
1. Make a small
poster to hang in their office FREE TRAINING AND LUNCH - Reservations
only. Date and time. Limited seating for five (5) attendees only.
Call: Your name and phone number - Before: cut-off date.
2. When they
call, they must confirm they will be there so you can provide lunch.
3. Purchase
ready-made sandwiches (you will need an accurate account of the
number of attendees)
4. Purchase
soft drinks, chips and cookies. (Keep soft drinks in a cooler with
ice)
5. Have disposable
plates, napkins and cups ready.
6. Get to the
office early in order to set up the table with the above items,
plus whatever handouts you may want the realtors to have.
7. BOLDLY PRONOUNCE
BEFORE BEGINNING “If you eat the food I have brought, you
must stay in this room and take part in the training”.
8. Try not to
run over the 20-30 minute time line you had originally set.
4. Leave the necessary
forms, complete with your contact information on each page, with instructions
on how to fill them out and your business cards so the realtors will
have a way to reach you when they find a prospective deal.
5. Your entire presentation
should be comprised of the “advantages” of suggesting a
seller-financed transaction to all parties concerned. As well, remind
the realtors that when a deal closes, they will still get their usual
commission. There will be no “finders fee” or other fees
coming from you. In most areas “double-dipping” is illegal
anyway.
6. Be sure to thank
them for attending, let them know they can call you at any time, and
then send “thank you notes” when you get back to your office.
7. Follow up every
couple of weeks, either by phone or by visiting their office with donuts,
cookies, etc.
8. If you bring
food, they will come - and they will remember you.
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Trusts
no cure-alls to seniors
Editors note:
Many of us in the paper business also invest in real estate. We felt
the following was of interest to those of you that have looked into
or are considering “Trusts” as part of your estate planning.
Russ Wiles
The Arizona Republic
A flier making the
rounds in Sun City, AZ invites seniors to learn how to avoid "estate-devouring
probate charges and attorney fees." The recommended solution: a
revocable living trust. No surprise there. If you open any newspaper
or check your junk mail carefully, you're bound to run across an ad
touting living trusts.
Once a tool of the
wealthy, trusts have evolved into one of the most mass-marketed estate-planning
devices around. Ads play on fears about probate, taxes, privacy invasion,
reckless heirs and more.
A well-crafted living
trust certainly has several sound uses and can allay some estate-planning
worries. But for seniors on a budget with fairly simple needs, the higher
costs can't always be justified.
At several hundred
dollars and up, trusts tend to cost more than wills, beneficiary deeds,
transfer on death titling and other estate-planning tools designed for
the middle class. That's why critics say living trusts are oversold.
For example, the
Arizona Attorney General's Office is warning about "high-pressure
salespeople" who use trust documents from office-supply stores
to charge thousands to unsuspecting seniors.
Even the Arizona
State Bar is waving red flags. The group's warnings center on non-attorneys
selling living trusts, a legal but dubious practice in Arizona.
Like a will, a living
trust is a document that lets you decide who gets what at death. Trusts,
however, tend to be more versatile. For example, they can be used to
delay payments to a beneficiary who might squander a large sum.
But how about other
claims, probate avoidance, privacy, estate taxes and the like? Here's
how trusts break down:
•
Probate avoidance. It's true that assets contained in a trust
pass to beneficiaries outside of probate. But there are various other
probate-avoiding devices such as retirement accounts, insurance policies
and jointly owned real estate.
Besides, probate
in Arizona generally isn't the costly, lengthy ordeal it is in many
other states.
•
Privacy. With a trust, you generally don't have to worry that
your financial laundry will be aired in public. But that's not common
with property transferred through probate, where an inventory of the
deceased person's assets gets compiled and sent to the beneficiaries,
not the public, said Joe McCabe, an estate-planning attorney at McCabe
O'Donnell in Phoenix.
•
Legal challenges. Another marketing argument made in support
of trusts is that they eliminate the danger that heirs might wind up
in court. In truth, both trusts and wills can be contested.
•
Estate taxes. One valid use of a trust is to reduce, if not
eliminate, estate taxes for married couples.
A trust with proper
wording can do this by separating the joint assets into two trusts when
the first spouse dies. The effect is to give each spouse the full exemption
amount. This year, each person can pass $1 million without triggering
estate taxes, so a couple with a proper trust can avoid $2 million.
The flip side is
that people with less than $1 million in assets won't face estate taxes
anyway, and the exemption amount is scheduled to rise sharply in future
years. Proper wording to minimize estate taxes also can be inserted
in a will.
"A testamentary
trust created by a will can get the estate-tax benefits," said
Roger Curley, an estate-planning attorney at Curley & Allison in
Phoenix.
So what
are benefits of trusts?
Trusts play a role
for people seeking professional money management while alive, a service
geared to investors with at least a few hundred thousand dollars in
portfolio assets. Then there's the reckless-heir argument. If you have
minor children or your grown kids are financially immature, "you
probably don't want to hand them $1 million at once," said McCabe.
In such cases, a trust can help preserve the estate until your beneficiaries
are able to handle it. The "revocable" part means trusts can
be changed or dissolved if situations change. Further, trusts can prove
helpful if you own property in another state, allowing beneficiaries
to avoid probate there.
Trusts and properly
crafted wills also make sense for people seeking to minimize estate
taxes. This is a risk for people worth at least seven digits, a figure
that's easy to reach if you have a big life insurance policy.
“But perhaps
the biggest reason for living trusts is that they allow you to provide
for your own care should you become incapable of doing so, through the
naming of a successor trustee. This can be a simpler process than having
a probate court name a conservator for you”, said John Vryhof,
an estate-planning attorney at Snell & Wilmer in Phoenix.
A living trust also
is better than a financial power of attorney in cases of incapacity,
Curley said. Powers of attorney are directives that grant another person
the power to make decisions for you if you become physically or mentally
unfit. Yet, brokerages, banks and other financial firms sometimes won't
recognize powers of attorney that are even a year or two old.
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Standing
Room Only at “The Forum”!
The
Forum, here at NCC's web site is the place to "hang" to
pick up the latest tips, techniques and answers to questions relating
to a variety of arenas in your industry. You never who will be joining
in on the conversation.
Have a question
about a deal you're working? Not sure if there's a market for certain
cash flows? Wondering what's the best way to find certain note types?
The Forum is the industry clearing house for questions like these and
ANYTHING you have to discuss!
According to NCC
President, Ed Lisogar; “We prefer our associates post their questions
at the appropriate section at the Forum rather than send an e-mail directly
so that ALL of our brokers and consultants can appreciate your question
and our answers”. Ed stresses the importance of reviewing the
existing postings before posting your own as in many cases, your question
or topic has been asked and answered previously.
Post
questions or comments on a variety of topics. Join in on an ongoing
discussion. Respond to postings from other brokers as well as investors.
Share your experience with your fellow brokers by adding YOUR OWN comments
to postings already in place.
It's all there for you at the "Forum".
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Social
Security for Congress?
From
Jeff Armstrong, Armstrong Capital
Perhaps we are asking
the wrong questions during election years. Our Senators and Congressmen
do not pay into Social Security and, of course, they do not collect
from it. Social Security benefits were not suitable for persons of their
rare elevation in society.
They felt they should
have a special plan for themselves. Many years ago they voted in their
own benefit plan. In more recent years, no member of congress has felt
the need to change it. After all, it is a great plan.
For all practical
purposes their plan works like this: When they retire, they continue
to draw the same pay until they die, except it may increase from time
to time for cost of living adjustments.
For example, former
Senator Byrd and Congressman White and their wives may expect to draw
$7,800,000.00 (that's Seven Million, Eight-Hundred Thousand), with their
wives drawing $275,000.00 during the last years of their lives. This
is calculated on an average life span for each.
Their cost for this
excellent plan is $00.00. Nada. Zilch. This little perk they voted for
themselves is free to them. You and I pick up the tab for this plan.
The funds for this
fine retirement plan come directly from the General Funds--our tax dollars
at work! Meaning from our own Social Security Plan, which you and I
pay (or have paid) into- every payday until we retire (which amount
is matched by our employer)--we can expect to get an average $1,000
per month after retirement. Or, in other words, we would have to collect
our average of $1,000. monthly benefits for 68 years and one (l) month
to equal Bradley's benefits!
Social Security
could be very good if only one small change were made…that change
would be to jerk the golden fleece retirement plan from under the Senators
and Congressmen. Put them into the Social Security plan with the rest
of us and then watch how fast they would fix it.
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Diversification:
The key to surviving in this industry
As interest rates
for all types of real estate loans continue to hover at, and more recently,
DROP once again, many new as well as seasoned brokers find that the
real estate side of the cash flow business is becoming increasingly
"thin". Too many brokers chasing the same note type.
We have always found
that educating yourself in as many "diversified" note types
will see you through the lean times. In some cases you may find that
an area that you hoped would simply supplement your present expertise
soon BECOMES your company's main focus.
When was the last
time, if ever, you seriously considered getting involved with factoring
of commercial account receivables? Despite low interest rates, it's
never been harder for BUSINESSES to qualify for small business loans...or
ANY business loan for that matter. Defaults, BK's, etc. are setting
records everyday. As a result, banks and typical lending institutions
are becoming increasingly "skittish" when it comes to lending
money to businesses for ANY reason. Small business America cannot keep
up with the demands of their customers as the majority of their cash
flow is tied up in the invoices they are waiting for their customers
to pay. Factoring brokers help these parties get a high % of their invoices
(in many cases up to 80%) within 24 hours.
90% of this country's
vendors and service providers find they have to provide credit terms
to their customers in order to stay competitive. Cash on delivery is
literally a thing of the past. However, waiting 15, 30, 45, even 60
days for your outstanding invoices to be paid is preventing you from
being productive and robbing you of higher profits.
Imagine receiving
80% of your invoiced amount the same day the product/service and respective
invoice was delivered. How many additional orders could you fill? How
many more customers could you attend to? Imagine the increased productivity
and profitability by having cash in hand versus waiting for your customers
to get around to paying you. Additionally, what kind of discounts could
you take advantage of from your vendors if you paid them within 7-10
days?
Factoring accounts
receivable has never been easier and more affordable. When an invoice
is generated we purchase it and advance up to 80% of the invoice amount
directly to the client's bank by wire transfer within 24 hours, sometimes
the same day. Then, when the customer pays the invoice, the client receives
the remaining balance, minus a nominal fee. Think of the additional
orders they could then fill in the time they used to spend waiting for
invoices to be paid! The additional profit margins on orders that previously
could not be filled more than off sets the factoring fee not to mention
the discounts they may realize from paying THEIR suppliers early. Factoring
is a "WIN-WIN" for our clients nationwide.
How does the broker
get paid? You receive a % of what we charge, typically 15%. However
here's the real wealth in being a factoring broker...for every account
you set up with our company, you get paid for EVERY INVOICE WE FACTOR,
FOR LIFE. This residual income is what makes factoring so attractive
for the brokerage community.
A simple two page
application, copy of their Articles of Incorporation, aging report and
a sample invoice is all that's required to get started.
Please feel free
to contact us for information on increasing your company's productivity
and profitability. E-mail your request today and we'll e-mail all company
information including the application to your attention. Additionally,
all company criteria is at our broker friendly web site.
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Broker
Question of the Month
Every issue the
staff at NCC select a question from the NCC Forum to share with our
newsletter subscribers. Got a question, comment, story or experience
to share? Post it at the NCC Forum.
This issue's
posting is by Marty Wong who asked:
Hi Ed,
I have a client
who has an opportunity to purchase a 5 unit complex in So. Calif. from
a friend of his. He wanted to know if we would be interested in a simultaneous
closing for the note. Here is the summary: 5-unit complex (5 two bedrm,
two baths), appraised value is $450,000, he can purchase it for $400,000
with no down payment. The owner is willing to carry a 1st at 8%, amortized
over 30 years with 5 year balloon. Can this be done?
Marty:
Head about 1/2 way
down the postings at the RE page here, and find the posting entitled
"Simultaneous Closings"...that really says it all.
A concern here that
you should keep in mind for this and future deals is what the lack of
any Payor equity is going to do to this deal. Getting in with no money
down is great for the Payor TODAY, however, look what it's going to
create in 5 years. When the balloon is due, the Payor will have to find
a lender for an approximate 95% balloon ITV (based on sale price). I
don't know ANYONE that will make that loan. Lenders want to see an investment
on the borrower's part, not take all the risks themselves.
If the seller did
this deal, our interest might be in a small partial, keeping the ITV
around 40%-55%, but we definitely wouldn't be interested in any piece
of the balloon. It's not going to get paid.
Subject to all due
diligence, 58 payments would have a market in the $118K range (less
your fee). If the seller can use that, she'd at least have +/-$100K
instead of nothing at close, AND she retains the balloon (just under
$400K).
Run that by her
and see...who knows, stranger things have happened!
Good luck.
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…and
finally
If you had bought
$1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.
With Enron, you
would have $16.50 of the original $1,000.00.
With WorldCom, you
would have less than $5.00 left.
If you had bought
$1,000.00 worth of Budweiser (the beer, not the stock) one year ago,
drank all the beer, then turned in the cans for the 10 cent deposit,
you would have $214.00.
Based on the above,
my current investment advice is to forget investing, drink heavily and
recycle.
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