Cash Flow With Joe

Do Your Notes Need To Carry Interest?

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I was at worship the other day with a five year old who was trying to sell his Rubik’s Cube.  I didn’t know they still make those things, but, I played along.  I asked him how much he wanted for the Rubik’s Cube.


Tyner:  “Nine hundred sixteen”.

Me:  “Nine hundred sixteen what?”

Tyner:  “Cents.”

Me:  “Ok,”  “How about ten cents down, twenty cents a month until it is paid off?”

He shouted, “SOOOOLLD!”


I chuckled.  As I walked away, cube in hand, I heard Tyner say in a super excited little voice, “I’m RICH!”  We can learn a ton from this little Rubik’s Cube deal that applies to the offers we make every day.


First, did you notice that I didn’t haggle with him over price?  Tyner is only five. Nine hundred sixteen was a big number he pulled out of the air.  As it turns out, $9.16 is almost fair market value for a Rubik’s Cube.


You can make a higher offer on a house IF the owner will finance it.


You just need monthly payments that are low enough for you to have positive cash flow. When you give the seller their price, they will likely say to themselves, “I’m RICH!” as you walk away, keys in hand.


Next, did I mention anything about interest when I made Tyner the offer? No. I learned this listening to a Jack Miller seminar.


Jack asked his class, “Do you think notes should always include interest?” His students said “Sure”. He asked, “Why?” Jack then made the claim that 90% of our country’s debt is loaned at zero interest. Hard to believe, right?


He was talking about those little green pieces of paper in our pockets that say “Federal Note” on top.


You literally have $1 worth of the country’s debt when you have a $1 bill.  This debt was financed to you at zero interest.


If you can accept zero interest on your money, why wouldn’t the seller?


When you make offers, don’t mention an interest rate.  If the seller thinks they need interest, let them ask for it.


Have you considered zero interest on any of the notes you hold?


This works well on short-term notes. Instead of creating a note for $7,000 at 9.73% interest for 36 months payable at $225 a month, why not do the same deal this way:


$9,000- payments of $225/month for 40 months at zero interest?


Here is what happens:


  • First, you make your deal more attractive to your buyers because they are getting ZERO interest. You also make more money, guaranteed!
    • In scenario #1, the total loan payout is $225 x 36 months= $8,100 of which $1,100 is interest.
    • You do not receive all $1,100 of the interest if they pay you off early.


Wouldn’t it stink to lose that money because they refinanced to a lower rate?


  • In scenario #2, you make $9,000 even if they pay you off early.
  • You were able to increase your sales price. This comes out to $2,000 over your original $7,000 because it was advertised at zero interest.
  • Compared to the first note, the no interest note makes you an extra $900!


It is a win-win situation. You make more money and your buyer loves you. This strategy is fantastic when doing Lonnie Deals or other short-term notes. I hope you find that of interest (pun intended).

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