Joel Cassway has worked as a Certified Financial Planner and has taught the note business for over 25 years. In this interview he answers the question every newcomer asks, whether people really succeed at brokering paper, and explains what separates the few who do well from the many who quit.
Why institutional competition helped note brokers
Q: Is this a good time to be in the note business?
I think this is the best time ever to be in it. I’ve been in notes for 30 years, and 10 of them have been successful. The good news is that it’s the last 10!
The main reason is institutional competition. This is a relatively recent development. For years you had to have private investors. Then some institutions began buying paper, but if you wanted to deal with them you had to take whatever they offered. Because the institutions now compete with each other, their buy rates have come down greatly.
Buy rates are the best they’ve ever been, and so is the amount and variety of product the institutions will buy. At one time the only thing you could sell them was plain vanilla real estate loans. Now they buy commercial loans, land notes, lotteries, structured settlements, annuities, viaticals. The list is almost unlimited.
There is also a lot of economic uncertainty. Many people who hold receivables are worried about the future, and when that happens they like to go to cash.
Why most new note brokers fail
Q: What has been the impact of all the new people who have entered this business?
I think it’s healthy. Competition between note brokers has stirred the pot. At the time of this interview we were hearing estimates of over $100 billion in notes available in real estate alone, not counting all the other types of paper. Even so, most people who get into the paper business fail.
The note business takes work and resources. Nobody gets rich quickly or easily in this or any other business. Most of the people who don’t make it started out thinking they would make a lot of money with little or no work.
People fail in the paper business for the same reasons they fail in any business, and there are essentially two. The first is lack of money. That is not a problem here, because funding for good notes is plentiful.
The second is the lack of a well-thought-out marketing plan. People will spend thousands of dollars on basic education to learn the business and almost nothing to market it. My most successful 10 years began when I decided to start spending money on marketing. I have spent a substantial amount on it since. But what would it have cost me not to spend it?
What the successful 5% do differently
Q: Are there really people successfully brokering paper?
Absolutely. About 95% of the people who start in paper fail. That means 5% succeed to one degree or another. Most of the 5% are just making a living at it. Then there are the few who make the quantum leap and really do well. My observation over 25 years is that these are the people who market their business.
This is a part-time business in the beginning. Like any commission business, you won’t make substantial money in the first six months to a year, largely because it takes a year or so for the seeds you plant to sprout and grow.
Most people hang their hats on one or two techniques. Maybe they send to a mailing list once in a while, but they don’t know what to do from there. They don’t have a logical, well-thought-out plan.
Think long-term about every mailing
This is a long-term business, and most people think short-term. If you think long-term, the purpose of a mailing changes from “How do I get them to sell me their note today?” to “How do I get them to keep what I’m sending?” A letter is nothing more than an introduction, essentially a business card. For most people in the note business it’s the beginning and the end.
Say you send a mailing of 100. You might get 10, 5, 2 or even no responses. Obviously you jump on the responses you get; those are your short-term successes. But your long-term prosperity is in the 90%, 95%, 98% or even 100% who don’t respond.
I’ve looked at why people don’t answer letters from note brokers, and brokers need to know this:
- They have already sold their note. You can’t do anything about that.
- They are happy with what they have. That is why you must create urgency. Done properly, you can turn someone who doesn’t want to sell into someone who does. The way to do it is to give them something to keep, so that when the urgency arrives, you are the one they call.
- A competitor has already scared them. Many note brokers are unprofessional, make horrible offers and don’t know how to handle people.
The point most people miss, even many successful ones, is that most closed transactions come from people who first turned down your offer or never responded to your mailing at all. That is why a small response, or none, doesn’t bother me.
Build a funnel of things note holders keep
I funnel note holders into several resources we created for them.
- A recorded hotline message. It runs about 3 minutes. Many people are afraid to call because they don’t want a discussion with a live person. The message is calm and non-threatening, and offers something free to those who listen to the end.
- A Note Owners Manual. That free item works like the owner’s manual for an appliance. It has dozens of helpful hints, such as why the note holder needs fire insurance. It gets people thinking about things they never considered: “Wasn’t that handled by my attorney? Do I have the right to that? How much does it cost?” Now you are in a conversation, and perhaps you have created urgency. Even without a purchase, you have started a long-term relationship, which is the whole purpose of marketing.
- Mortgage appraisals. These are the next step, and they lead to where everyone in this business should be headed.
A well-thought-out marketing plan has two goals: first, get people to keep what you’ve given them so they call you when it’s time to sell; and second, even more important, move out of the private market and into the professional market.
Move into the professional market
A lot of people hold paper. But if you do one deal with someone who holds one note, and you are 100% successful, you will never do another deal with that person. The real success in this business comes from working with financial professionals: accountants, financial planners, attorneys, and real estate and mortgage brokers. Mortgage appraisals give you entrée into that market at a very different level.
If someone new to the business can build a relationship with just one or two financial professionals in the first year, that can keep them in business. One or two can become five and ten, and five and ten can become fifty and a hundred.
So it doesn’t surprise me when people ask whether anyone succeeds in this business. Most people will fail. They may be doing a lot of big things right, but they are doing a lot of other things wrong. In a nutshell:
- Think long-term.
- Create urgency.
- Give note holders something they will keep.
- Get into the professional market.
