Cash flow notes like the trust deeds and tax lien certificates can be traded. When we say traded, this means that they can be bought and sold for a profit. What is very interesting in the trading of cash flow notes is that it offers more security to those who want to invest on it. Why? It is because these notes are secured by a property. In case the debtor of the note will fall short in paying the amount due, the investor or the creditor can run after the property that is used to secure the note. This is practically one of the reasons why cash flow note trading is also very popular.

Cash flow notes are debt instruments. The creditor, the one to whom payment should be made, has the possession of the note. The cash flow note, being a document or a debt instrument, has the records of the principal amount due, the interest thereon, and the terms and dates that payment should be made. On most cases, debts are paid in an installment basis.

The creditor, for whatever reason he has, may choose not to wait until the whole amount is due. If he wants to receive the payment in a lump-sum basis, he can trade the note to a cash flow note buyer. The buyer now has the right to receive payment from the debtor and to run after the collateral property. In other words, the creditor’s rights over the debtor are now transferred to the buyer who is now the brand new creditor.

The price of the note varies. The variation of prices is the reason why trading in cash flow notes are profitable. The selling price of the note is affected by many factors. Basically, if a certain note is deemed favorable to be bought, it is of a high price. But if the note is not attractive, it can be sold for a low price so that purpose of selling it is fulfilled.

If the property that secures the note is a great one, more buyers will be attracted in buying the note and the final trading price can be high. On the other hand, if the credibility status of the debtor is bad, the price of the note is lowered by some rate.