Give This A GO! - Posted by Farr
Posted by Farr on May 27, 1999 at 10:36:26:
Hi Babesy (Love That Name!):
The best way to illustrate yield is to make up a “Lonnie” example. Assume that you find a MH that a seller is pretty motivated to sell; let’s say its an '82 model, and he or she will let it go for $5,000.
Now, let’s assume that you offer it creatively for $9,995, with $1,000 down, and it sells. You agree to carry the note for 36 months, at 12% for a monthly payment of $298.76. On your TI (or any other calculator for that matter), you enter 8995 (or -8995) in PV, 36 in N, and 1 in i (i.e. 12%/12 months). Then hit PMT, and you get the $298.76 above.
Now to YIELD! Remember you paid $5,000 for the home? But you just got $1,000 from your buyer, so that makes your net investment $4,000. Here we go again! 4000=PV (some calculators you to enter a minus sign for PV, such as -4000), 36=N and 298.76 is PMT; then solve for i (the calculator yields a MONTHLY rate), then take this amount times 12.
In this case you’re earning a WHOPPING 81.12%. See why Lonnie says, “…good nuff?” BTW, learn all you can from this man. He’s not only a great guy and delightfully entertaining, but he is very knowledgable!
Good luck in your endeavors!