Your yield if you receive the payments without and early payoff is 22%
To calculate the payout (PV) of the back payments if you were to be paid off immediately, first calculate the PV of the payment stream. We already know that which is the $10953.40 but you have to discount it to the present. The easy way is subtract $10953.40 from the 15k, but I’m going to give you the fundemental formula for doing it also so you can discount backend tails.
Enter
PMT 0 I 10% N 120 FV 10953.40
Calculate for PV Should get 4046.60
(for some reason Notesmith is throwing out $4046.26, and my trusty TI isn’t handy) Anyway, it’s late and that’s the fundamental way to figure the PV.
To figure the present value of a future cash flow, when doing a partial, is there a specific equation/data format to arrive at the PV (based on the existing terms of the note) or does it depend on how you structure your offer? Basically, I guess I am asking how to come up with the starting amount for the partial amortization – what the PV would be if the owner sold the property and cashed you out the day you closed the deal. Here are the numbers:
20 year note for $15,000 at 10% (240 pmts of $144.75)
Buy first 10 years (120 pmts) for $7000.
What would be the beginning mortgage amount of the partial amortization?
I am just starting John’s course and haven’t gotten to the answer to this yet - I’m impatient. If anyone has an answer, I’d appreciate it.