S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the May 1972 issue of the Real Estate News Observer.

The quality of the poetry may be questionable, but the philosophy it expresses is, I think, beyond dispute.

Admittedly, some paper is not worth papering your walls with, but that which one feels comfortable (and that takes in the vast majority of notes) is truly an excellent commodity, and one that the real estate practitioner would be wise to understand and learn to work with.

Notes should be thought of as the annuities of our business in as much the same way renewal premiums are to the insurance man. The real estate practitioner who turns up his nose at a note is shortsighted at best and a bit of a fool at worst. Anyone who has gone the “paper route” knows it doesn’t take long before the astute Realtor, with a keen eye toward the value of a well-secured note, can accumulate a sizeable portfolio of notes that can bring him a monthly income worthwhile.

Moreover, it is nothing for an active and knowledgeable Realtor, with an
understanding of the benefits in paper, to have an estate in notes alone of $100,000 or $200,000 or even more. But you must learn to hang onto notes when they come your way. If you constantly sell or exchange this paper, you will eventually have nothing. Don’t make the mistake exchanging or discounting paper as soon as you get it.
Consider this: The taking of notes can not only provide you with a steady and ever-increasing income, but this very income can also give you the flexibility that from time to time will mean the difference between making or not making a deal.

If you are forever pressed for cash, your flexibility goes out the window in your unending need to take only cash fees. But once you have established a steady and even sizable income from the notes you’ve taken, the pressure is off and you’re in the enviable position of being able to wheel and deal and, oftentimes, take a larger fee in the form of a note than if you took cash at the time of closing.

Over the past dozen years, I have made an actual “hobby” of accumulating and collecting all the notes and paper that came my way. The payments on these notes range from as little as $3.00 to well over $200 a month, and the range of interest rates is equally as wide!

Keeping track of the notes due you is a minor problem and if you have an office set-up, it is no problem to have your accountant set-up a simple set of books to record all payments and their due dates. Amortization schedules can usually be purchased for aiman cont.
a modest sum from a bank or computer service in your community, thus allowing incoming payments to be handled and recorded with ease. You can, should you prefer, work with a bank and pay them a small monthly fee for servicing and collecting your accounts.

Naturally, you’re bound to have some slow pay, and now and then a no-pay. But if your security is good, and if you’re patient (and also take the trouble to find out why payments have stopped coming, most times there is a cause that can be remedied) you can usually get the payments back on track without resorting to undue pressure or legal action. In the event the debtor has moved or lives in a different part of the county, you can probably exchange these slow or delinquent account to another Realtor whose office is closer to the maker of the note and thus, in a better position to work with the debtor and eventually collect the note in full.

Obviously, there are bound to be problems from time to time, but the little bit of trouble you’ll experience will be far outweighed by the inherent advantages of acquiring and holding onto notes until they either mature or are paid off.

I think it should he clear that paper can be a most valuable part of your estate, one that builds and builds. If you’re not interested in making the collecting of paper a serious business, then do it as a “hobby” the way I have. The results will be the same and just as gratifying.