Using T-bonds To Purchase
Would appreceiate anyones experience in using 0 coupon bonds (AAA treasury bonds) to purchase real estate. Have a seller with 30 units, 20% down, will finance, will except bonds.
Thanks in advance.
Is the seller applying the present market value of the bonds against your 20% down?
If so, then the value of the bonds and the value of a 20% downpayment in cash would be the same. Using cash would be cheaper since you avoid the brokerage commission on the bonds.
Good advice, I bow to superior wisdom really great, the way to go. Proper Posting.
But alas, I get another message aka Vibe from your posting. You sneaky person, where did you learn these things? You been talking to the ghost of Kid Yellow Gloves?
Zero Coupon Bonds, of course, I know you want face value to be applied to the downpayment. Do you know what A plus is? Thats when the Seller cuts you a check at the end of escrow cause the face of the bond is above the downpayment.
Forget heaven, you are due for a hotter place. Don't hurry I will save you a seat on the coals, next to me and my cat.
The trick is in presentation. I do not know your seller, I do not know the level of his sophistication. If I remember my book its on page 74. Chapter heading Junk Bonds for Equities.(Restricted to Law Enforcement Agency's)
Man by the name M.Penn Phillips the Guru of Desert Land. Delt with Jack Rabbits and Coyotes in open and notorious possession. Made Millions he alone created so much bad paper they used to say there was no desert in California that was not covered in parchment.
He was the first person to use Bonds in Tender (Frankly I think he manufactured some of them himself.)
Go for it, a common practice in days gone by.
Bemused Lucius
Thanks for your comments.
The 30 properties are mortgage free. This sale would create a large capital gain. The seller will carry back for 15 years at a modest rate. Or will accept t-bonds par value with a 10 year maturity. I plan to offer 300k down p/v bonds, with release of equal value of property to mortgage raising the remainder of capitol to purchase additional bonds to pay out the seller.
ie: no experience buying or using bonds...
Give me those Treasury Notes at par value, and I will do that deal too. I suspect your seller is implying that he will take coupon notes -- not zeroes.
On the last auction on November 11, the 9 year, 9 month notes sold at a premium to par. If you had purchased $300K of Treasury Notes (par value) you would have paid $301,272 through Treasury Direct (a little more if you used a securities dealer). At the time of the auction, the Treasury Notes had a coupon rate of 5.75%. Since the yield is down to 4.25% this past week, the premium for those same Treasury Notes is even higher.