Partials, partials, partials...

[Nehemias Ponce]

Hi everyone! I am at least ankle deep (but more like knee deep!) in my education in note investing. I am interested in dipping my toes in by perhaps buying a partial. I have up to $10,000 to begin with, and from what I can gather that is not a good starting point for purchasing a full note. That being so, what is the basic structure for buying a partial? 

For example, if I buy a group of payments; do I have to wait for those payment numbers to arrive before I get paid back for them?

If so, why would someone buy the last 5 years of payments on a 30 year note?  

Thank you all so much for your help!

-Nehemias

[William "W.J" Mencarow]

Hi Nehemias,

"if I buy a group of payments; do I have to wait for those payment numbers to arrive before I get paid back for them?"

If you bought a partial and the first payment you bought starts in the future, of course you will have to wait for them.   That is done, but most people buy the next X number of payments.  For example, you might buy the next 60 payments of a note with 120 total payments.  Then you get the next month's payment and continuing for the remainder of the 60 months of payments, every month.  Then the payments go back to the person who sold you the partial.

To use your example, it is certainly possible to buy the last 5 years of payments on a 30 year note.  Those payments would be deeply discounted because of the time value of money.

That is why I recommend that when you sell or broker a note, sell or broker a partial and keep the last few years of payments for yourself.   You will make almost the same amount of money, but you will have income years from now with nothing invested.  Do that over and over again and you will never have to worry about retirement.

Feel free to PM me if you would like more about how to do this. -- Bill Mencarow