Re: Help! Need some new ideas for upfront money - Posted by Lonnie
Posted by Lonnie on June 04, 2000 at 20:39:58:
Your figures are correct, $176.96 to your investor, $122.04 to you. But I have to agree with the others, why offer zero interest? In fact, don’t even quote an interest. Most of your buyers are only concerned with “how much down, how much a month.” Find out how much they can pay per month, how much down payment they can make, then use a rate of interest you’re happy with.
Here’s an excerpt from my revised book (if I ever get it finished). These are actual figures of a recent deal. Hope they help illustrate what I mean.
PS Yes, the larger down payment, the less you need to borrow, and the more you keep each month. Or, you could split the down payment with your investor, keep some cash for another deal, and still come out OK.
How To Get Five Extra Payments
I knew this couple could pay $1,500 down, which would leave $10,400 on a note. And I knew they could pay $250 per month. If I had used my standard interest rate of 12.75%, kept the payments at $250, and financed $10,400, the note would have been structured like this.
How Note Was Structured
N I PMT PV
55 12.75 250.67 10,400
If the note had been structured at 12.75%, (the industry standard) I would be due 55 payments, totaling $13,786. But, by asking the buyers if 60 payments of $250 per month would work, I’ll collect $15,000, an extra $1,214. The difference in the interest rate is less than 3%, but it’s added five more payments to my note.
This couple wasn’t really concerned with the interest rate. Their only real concern was being able to buy the home they loved, with affordable payments. They couldn’t care less if the interest is 12.75%, or 15.47%. Oh, and I also increased my lot rent $15 per month.