What are notes?

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From: Knot Related


What are notes and are they used in Australia? There is a lot of mention of them on other (American) sites. I gather they are some form of agreement for private funds. Is it important to study up on them to invest in the Australian market?

Ken.
 
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Reply: 1
From: Paul Zagoridis


A "note" is short for Promissory Note and is legal and legitimate in all common law countries.

Whenever you lend money to anyone (including your mother!) get a dated and signed note acknowledging the debt, interest rate (at least a peppercorn), term and any other conditions. Should anything happen to the person, you have a record and worst case might write off the debt as a capital loss.

City based Australians seem to have forgotten about promisory notes these days. They are not favoured and there isn't an active market for them.

Private funds are available -- most popularly first (and sometimes second) mortgage against real property.

There is almost no point in studying up on any advanced techniques if you haven't got the basics. You learn the basics by doing them. Find an area and study it. Visit dwellings and make offers.

It's not rocket science and the safest way is really boring. But one day you'll wake up wealthy.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
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Reply: 1.1
From: Michael G


Hmmm,

I've hard hard evidence that I've lent money to people (it was actually written in the credit union loan as "borrowing to pay $$$ for yyy).

I think I need to talk to my accountant. "Cause if I'm thinking right, instead of paying capital gains tax for a property I sold this year, I may even been owed money by the ATO. This debt occured before the sale. Hmmmmm the things you learn on this forum.

By the way, I knew about Notes having reading quite a few books about the subject, but its always good to listen when people are talking. New perspectives are just are valuable as new ideas!

Whoa! getting dizzy, all these paradigm shifts are knocking me about :p

Regards
Michael
 
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A

Anonymous

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Reply: 1.1.1
From: Anonymous


Here is one for you.

I borrowed $4k from a family member with a promissory note of $8k back in 6 months to settle on a deal. (The deal was good enough to allow this).

I have got a contract in place with the family member and the family member needs to put this down on their tax return as an income too. As this person doesn't receive any income anyway it will all be tax free for them and on top of a positively geared property I increase my tax advantages.

And my family member has said that the money will be ours anyway. It's our wedding money that we borrowed and now we've doubled it hehehe. So we are in effect providing money for our wedding before we have it and the Tax man is paying for it. Hence why I am post anon.... Don't want Mr Tax man attacking me now do we.

Cheers
MR Anon...
 
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Reply: 1.1.1.1
From: Paul Zagoridis


Plus if you talk to your accountant you might find some way of taking the gain tax free.

How? hmmm .... hobby income (lose the ability to deduct it if it tanks).

I dunno some sort of non-business income. Should be doable, especially as it's the wedding money.

Paul Zag
Dreamspinner
 
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Anonymous

Guest
Reply: 1.1.1.1.1
From: Anonymous


Mmm. yeah, so we borrow the money regularly and then it becomes a hobby for the family member (I love that one) and they get tax free status. And I get to lower my CGT when I sell plus get to have a bigger wedding.


Interesting....

See thinking outside of that square can be so much fun.

Cool
Mr Anon
 
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Reply: 2
From: Tom Cleary


Ken
Notes, also called cash flows, income streams, debt instruments or paper, are thought by many to be limited to bank notes or discounted seller carryback mortgages.

Today, however, the terms mean much more. Not only are smart money managers investing in and brokering receivables and discounted paper like private seller carryback mortgages, trust deeds and contracts for deed, but almost any other debt that is paid over time, not necessarily secured by real estate, can be a marketable cashflow.

This includes annuities, leases, insurance benefits paid in installments (called structured settlements), retirement accounts and royalties, even lottery winnings -- and much more. Even such esoteric financial instruments like tax lien certificates, contractor's liens, medical receivables and commercial accounts receivable ( factoring ) can provide you, or smart institutional group investors, with multiple streams of income.

In other words, today the term cash-flows can mean any marketable I.O.U. that represents a promise to pay over time.

Notes provide cash flows. They are usually secured by something of value that can be foreclosed on or otherwise claimed by the note owner if the payments are not made. They are normally sold at a discount from their balance. For example, a $10,000 note may be sold for $8,850.00.
From an "introduction to notes"
Check out http://www.papersourceonline.com/ecourse.htm
where you can do a free ecourse
Regards
Tom
 
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