Cash Flow With Joe

Do your notes need to carry interest?

by | Oct 27, 2016 | Notes | 0 comments

Do your notes need to carry interest?



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


Tyner:  “Nine hundred sixteen”.

Me:  “Nine hundred sixteen what?”

Tyner:  “Cents.”

Me:  “OK, how about this; I can pay you 10 cents down and 20 cents a month until it is paid off.”

He shouted, “SOOOOLLD!”


dollar-banknotes-rubiks-cube-unfinished-white-background-57063887 (2)I chuckled. As I walked away, 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 on real estate.


First, did you notice that I didn’t haggle with him over price? I gave him his full asking price. Tyner is only five, and 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.


Just like Tyner, sometimes sellers pull a big number out of the air. You can make them a full price offer IF – and that’s a big if – the owner is willing to carry back financing.


In order to give your seller a full price offer like that, you’ll need monthly payments that are low enough for you to have positive cash flow. That’s a must. When you give the seller what they’re asking, though, they’ll 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 made the claim that 90 percent of our country’s debt is loaned at zero interest. Hard to believe, right?


The debt he was referring to was those little green pieces of paper in our pockets that say “Federal Note” on top.



A one-dollar bill literally represents $1 worth of our country’s debt. This debt was financed to you at zero interest.


So, 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. For example, 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:


A $9,000 note with payments of $225 a month for 40 months at zero interest?


Here’s what happens:


First, you make your deal more attractive to your buyers because they’re paying ZERO interest. You also make more money, guaranteed.


In the first scenario, the total loan payout is $225 for 36 months which equals $8,100 of total income- $1,100 of that is interest. If the buyers pay you off early, you don’t receive all of the interest. Wouldn’t it stink to lose that money because your buyer refinanced to a lower rate?


In scenario two, you make $9,000 even if they pay you off early. Because the deal was advertised at zero interest, you were able to increase your sales price. That comes out to $2,000 over your original note amount of $7,000.


Compared to the first note, the no-interest note makes you a minimum of $900 more! (Assuming both notes go to term $9000 minus $8100 equals $900) It’s a win-win. You make more money and your buyer loves you.



This strategy is fantastic when doing Lonnie Deals or other short-term notes, if that interests you. (Pun intended.)


Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more info, or to ask a question, visit or call Joe at 678-986-6813.

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