Yield input please! - Posted by John

Posted by Marty (MO) on September 01, 2005 at 16:08:35:

the 7yr old boy walks in and asks his dad, “Where did I come from?” Dad had been dreading this question… rolls up his sleeve and gives the kid the full birds and the bees talk. He finally finishes and looks at the kid and the kid’s eyes are glazed over… “Oh,” he says, “Billy’s from Chicago…”

Yield input please! - Posted by John

Posted by John on September 01, 2005 at 08:03:50:

I have yet to slow down enough to figure how to calculate yield, I have two of them that will become available by the 15th of Sept. So would someone calculate this for me,
Looks like this
Buy and repair cost ( too much) \$6k
Sell for \$14,900
term 72 month
I/R 12.5
Down \$2500.00
Amount of note \$12,400.

Re: Yield input please! - Posted by Ray (MO)

Posted by Ray (MO) on September 01, 2005 at 10:01:40:

Figure your note on your calc: \$12,400 PV, 72 N, 12.5 I, pmnt comes out \$245.66 as your pmnt. Now replace PV with your cost 6,000 minus your down 2500 equals \$3500. CPT I/Y and you have your yield. If this doesn’t make sense, get your self a TI BA II PLus calc and start practicing.

Re: Yield input please! - Posted by Mark Haugsten

Posted by Mark Haugsten on September 01, 2005 at 09:08:35:

Annually from date of sale?
\$6000 invested.
Payment 245.65x3=736.95
dp 2500.00
Total 3236.95

\$3236.95/60(1%of 6k)=53.95% for remainder of 2005

\$245.65x12=2947.80/60=49.13 each year thereafter.

Alternately
the first 12 months may be computed seperately as a 12 month year, so…

2947.80annual income+
2500 dp
5447.80 first year/60 again =90.79% first 12 months and then dropping to 49% anualy thereafter.

Lastly,

Overall income on time, with no other fees, or expenses paid or owing.

72x245.65=17686.80+dp\$2500=20186.80/60=336.45% total…divided by 6 years is 56%

Then there is hourly ROI expressed over a century…hmmmm, well, um…

The easiest thing to ascertain in measuring returns is 1%of your investment. Always just take total and divide by 100. In your case that is \$60.

Any money you see and want to measure return for is now just divided once more by \$60 and the answer is always yor percentage. Then timeas a fraction of a year. Learn to see all numbers then, as %. Your payment of \$246 is 4.1%, you claimed “Payments about \$260.00”…so if we move slightly down, then each \$258 payment is 4.3%.

Now, with a little quick math to check my earlier finding, I just, in my head, multiplied 4.1x12 and its 48+1.2 (Old algebra trick), or 49.2%…now go look at first year finding by a different method, and we see it was 49.13%, or as Lonnie more accurately puts it…GOODnNUFF!

My only question is that you combined the numbers for 2 deals. I can only work with the stated numbers, yet the \$14,900 number appears to me to be a single transaction sale price. Are all numbers reflective of the deals, independently?? Or is the cost combined, or other dissimilar representation made??
All numbers need to be consistent, either numbers for one deal ONLY, or BOTH deals all the way through.

I left out ‘months to black’…You get \$2500, and then more than \$3500 arrives in the 15th payment. You get ‘free’ money in months 16-72. Not a bad deal, if you can get it.
In all these sets of returns I must complain I don’t have your true start date. I calculate returns from the date of dollar 1 out of my pocket and into a specific deal.

Now for just one humble suggestion.
Offer a discount note deal to your buyers, very reminiscent of discounting that is accepted in the note business. To whit, if they bring you the payoff, you will discount the principle balance x%.

Example. The couple brings you their 15th payment (your money point) and asks you for the payoff, as their 401k or self directed IRA will be able to charge them less interest. You offer a 50% discount for prompt payment of all outstanding principle.
today, the payoff is 10245.85
1st of next month 10106.93
If they bring you \$5100 on the prorated day that the payoff is exactly \$10200, you will accept that, and remove your lien. If they choose to exercise that, you can take all that money which is now profit, and do another deal, or 2, or 3, instead of waiting for 50+ more payments for your profit to dribble in at \$250 a month.

Of course you may choose to use this tool to reward prompt payments (like the 6 previous months must have been on time), or you may offer less %, such as 66% of payoff, (10200-3400=\$6800), or do any number of things. My point is that this gives you a lump sum sooner, just as you would recieve if you sold the note to any investor. This ‘investor’ just happens to live in the MH.

Just an idea, to get you out with money quicker, and to get you more capitol to do more deals.