Realistic timeframe to get to $1,000/month starting with $5,000

[Gary Dezoysa]

Hi guys,

I'm looking into non-local note investing as a means of achieving a 2nd income. $1,000 a month would be great and pay much of my monthly expenses, so that is my first goal.

I listened to Dave's book in the car but haven't had the time to fully process the information. What I've loosely gathered is below, can anyone tell me if these figures are in the ballpark?

-- I start with $5,000 and spend a few weeks looking for note brokers.

-- Invest into a $5k note yielding 15% per year, or about $750 per year, $60 per month.

-- Look for opportunities to recapitalize, either by raising private money (unlikely this early on) or "collateral assignment" loans to borrow at, maybe 7.5% while re-lending at 15%.

-- I keep doing this until I go from $60 a month to $830 a month, which would take 28 investments assuming they were all $5k notes yielding net 7.5%. If I acquire 1 new note every 3 months, it will take 7 years to hit my initial target.

I know this doesn't include notes that turn NPN, I'll have to read more about that. Are the numbers and timeframe roughly in line though?

Thanks

[Edward B.]

@Gary Dezoysa, based off of your numbers that is right, but there are a lot of holes in that strategy. 

First off will be finding notes for only $5k. Second will be finding one that yields 15%. That combination typically is for an extremely risky asset. Also, you are much more likely to find private money to recapitalize at this stage than a collateral assignment. Traditional lenders will want to see a proven track record and will want to lend against a much much larger portfolio of notes.

Honestly, the timeframe is highly dependent upon you. If you are only using your own money then it will take a long long time to grow from $60 to $1000. If you are using other peoples money, which you are when you talk about recapitalizing, then it can be done much faster.