There is no such thing as “smart money” – only smart people – the money goes where they go.
Planning – A General Overview
Becoming successful in any activity that requires education and training will also require planning. Without a financial plan – a road map – that shows you where you are now and where you intend to go, it is doubtful that you will have a successful journey.
Becoming a successful promissory note investor definitely requires an understanding of where you are now – financially speaking – what you plan to accomplish – and how you plan to get it done.
Examples:
“I now am age 30 and I want to retire at age 65 without any debts. I now have $20,000.00 available for investing. I want to use promissory notes to build my investment capital. I plan to add fresh investment capital annually. “
“I am now age 45 and I want to retire at age 65 without any debts. I now have $40,000.00 available for investing. I want to use promissory notes to build my investment capital. I plan to add fresh investment capital annually.”
In each of the above examples the person’s current investable funds, their current and future employment income, their current and future cost of living, their health, their family size, etc. must all be factored into their long-range investment/retirement plan.
Planning – Tailored To Your Individual Situation
Now, you should take pencil, paper, and/or computer and layout your individual plan for long-term investing success. Doing this, while not very exciting now, may be one of the most important financial exercise that you ever do. If you take your time and really apply yourself, you will go through a process of financial self-discovery and financial self-awareness that should be revealing to you. Remember-be honest and be realistic.
Force yourself to deal in specifics – -specific income dollars, specific time-frames, specific living expense dollars, etc. Do not “wing it” and rush through this exercise; take your time; be completely honest and open with yourself. If you “cheat”, do a sloppy job, do an unrealistic job, do an incomplete job, then you and only you will suffer the consequences.
Implementing Your Promissory Note Investment Plan
Now that you have laid a solid planning foundation it is time to start considering your implementation steps. Let’s assume that your investment funds are held in a Self-Directed IRA Account; further, let’s assume that you want to invest in promissory notes that are secured by real estate that is located within your own State, or that is located within 100 miles from your home. Based on these assumptions, let’s now consider the investing planning decisions that you should make.
Actual Planning Decisions Required (don’t generalize, be specific)
How much of my investment capital should I invest in any one note?
20%, 40%, 60%, 80%
What length of time should the note investment span?
6 months, 12 months, 24 months, 60 months, 120 months
How will I go about finding suitable promissory notes?
promissory note specialist, advertise, network, Google, personal contacts
How will I go about determining the quality of the note?
promissory note specialist, attorney, CPA, financial advisor
How will I go about determining if I want to be a minority investor-10%, 40%, etc – in a specific note?
character references of the other minority investors in the note, credit references and credit histories of the other minority note investors consult with a promissory note specialist
Who is going to be responsible for servicing the note? Who is going to collect the monthly payments, verifying that hazard insurance is in place, verifying that the property taxes are paid, send out year-end income tax reports to the minority investors and to the borrower?
THIS IS A VERY IMPORTANT DECISION.
a professional promissory note servicing company, one of the other minority investors, a CPA, a bookkeeper
How will decisions be made if problems arise with the borrower or with one of the minority note investors?
by vote based on percentage of ownership, by vote based on one vote per each investor, by a prior written agreement signed by the individual investors, by discussion, as problems arise, on a case-by-case basis
How will decisions be made if additional cash is needed to pay for legal fees, accounting fees, or to pay for unpaid property taxes and hazard insurance?
by vote based on percentage of ownership, by a prior written agreement signed by the individual investors, by discussion, as problems arise, on a case-by-case basis
Get Experience, Specialized Help
As you can see, all of the above decisions are very important. And, they will have to be made-by someone. But, do not become overwhelmed, or discouraged, or overly concerned about doing it all by yourself. With good, experienced guidance from someone who has already made these decisions numerous times, you will not be required to “reinvent the wheel” all by yourself. Having a seasoned promissory note specialist on your team to help the process along and will allow these decisions to be handled without you having to suffer any “pain”. An experienced promissory note investor and advisor can smooth the way. Engage a promissory note specialist to assist you and the other investors.
Conclusion
In order to be successful at anything, good planning is necessary.
Tailor the plan to your individual capabilities, needs and goals.
Don’t try to “reinvent the wheel” yourself when it has already been invented and perfected. Benefit from the mistakes that others have already made, and that they have already learned from. There is no reason for you to re-make costly mistakes that have already been made numerous times by others. You can and should have an expert help you avoid common mistakes.
Engage an honest, experienced promissory note specialist to help make the key decisions.
Future articles will expand on and explain – in detail – the pros and cons of all of the decisions mentioned above. Additionally, specific tips will be provided that will make your promissory note investing a profitable financial experience.