The following article is an excerpt from John's book "Creative Paper
At our educational seminars I've seen how excited people get when they see a concept often referred to
as "Tails." The name describes buying the "tail end" of
anote. We've talked about buying partials and usually described the benefits of buying
the first part of a note. There can be some great benefits in acquiring the end part of a note. In some
cases, it can be a "no cash needed" way to build a retirement income.
Would you be interested in seeing how to get a free monthly cash flow of over $400 per month
for 15 years? If you don't, you better stop reading right now and make an appointment with your
Let's buy a $50,000 note that pays thirty years and sell off the first 15 years to cover more
than the cost of the entire note. This makes a no cash investment in a 15 year cash flow that begins in 15
The first line shows the $50,000 note and it's terms. The second line shows the price we would
pay to buy it at a 16% yield. The third line shows what the note would be worth if we sold the first
15 years to an investor or institution.
||- 0 -
||- 0 -
||- 0 -
This shows that if we buy the whole note for $32,629 and sell off the first half for
$32,948 we would have a no cash deal and $319 to cover any costs. We are left with
payments of $438.79 per month that begin in 15 years and pay us for 15 years. A
free cash flow that just took us some creativity.
For those who claim little cash to buy notes, this takes the air out of their argument. There are numerous
other ways to invest in paper when your own funds are limited. Tax Free If all of
this were done through your self-directed IRA, you can have a tax free cash flow. If you are not currently
using your IRA to invest in notes, you are losing one of the best benefits available to
How is a "self directed" IRA different from the one you have now? Trick
question. It isn't different at all. The only difference is whether you are taking an active role
and choosing your investments or leaving the decision to some banker to do it for you. You can do a
"Trustee to Trustee Transfer" and work with a company that is set up to help you (not
themselves). This transfer is not a "rollover" and there are no limits or penalties
associated with it. If you would like some more information on tax free profits, drop me a line.
© 2000 Cashflow Specialists. All rights reserved.
John D. Behle, is one of the premier educators and practitioners in the field of "Real Estate Paper".
John has an extensive background in consulting and coaching. In addition to the original "The Paper Game"
book published in 1982, he is the author of 7 other books, several home study courses and over 200
nationally published magazine and newsletter articles on paper investment. You can visit him on the web at
Back to Real Estate Investing Articles