I’ve Converted! I’m now a Financial Passive-ist!
Albert Einstein said that compounding was the most powerful force in the universe. I’m sure if you’re investing you want the most powerful force in the universe working for you. When your money is compounding, then that is a true form of passive income: you just sit back and your interest becomes principal and starts earning more interest. Now, that’s powerful.
Banks make more money than anybody because they lend people money at a fixed rate and term and get collateral at a good Loan-To-Value. They use a very powerful mathematical formula to reap huge profits. It’s called amortization.
Here is an example how a mortgage works; a bank lends you $50,000 at 6% for 30 years with payments of $300 per month. Of that $300, $250 is gross profit for the bank and $50 is principal – or how the bank recovers its cost. For every $1 paid in principal, you pay $5 in interest. That is a 500% profit margin. I guess you can see why I said amortization is a powerful mathematic formula. Amortization is also considered passive income because, when banks lend someone money for a mortgage, they don’t pay property taxes, insurance, or maintenance. Banks simply collect a check every month.
Most mortgage note buyers buy large notes but when you buy small, short term mortgage notes from American Note Warehouse, your money becomes equipped with both of these wonderful financial tools. American Note Warehouse’s notes are below 50% LTV and pay at least 13% interest, but the most important information is how fast you get your money back. The last line on our list of owner financed mortgage notes is what each note pays per $1,000 invested per month. Our mortgage notes average $33 per month per $1,000 invested. If you buy a $15,000 mortgage note, it will pay you about $500 per month. In 30 months, you will have enough to buy another mortgage note that will pay you another $500 per month!
If you buy a $100,000 mortgage note that pays $900 per month at 10.3%, it will take you over nine years to collect enough to buy another $100,000. Your money is just snoring away and making you anything for almost a decade. If you bought $100,000 worth of our short term high yield notes, you would collect $3,300 per month (33 X 100). You will be able to add another $500 per month by buying your sixth note in just four mouths. Can you imagine how many notes you will own in four or five years? Our notes can produce a great retirement income!
To sum it up, if you’re a mortgage note buyer and buy short term high yield mortgage notes from American Note Warehouse your small mortgage notes will buy you more mortgage notes quickly (compounding) and your money will be growing at a very fast rate because of amortization. You don’t fix toilets, you don’t pay property taxes, and you don’t pay insurance. You are the bank (the lien lord) and not the landlord.
You now have a basic understanding of why I’m a Financial Passive-ist. This peace sign once stood for “Peace and Love,” but today it stands for “Amortization and Compounding.”