Seeling A Note... How Do I Structure It?? - Posted by Thane, MI

Posted by Tim (Atlanta) on February 20, 2001 at 12:04:23:

I don’t agree with your figures. If your partner has already put $3500 in the deal, got nothing from the down payment, and has to put in an additional $5000, he is in the deal for $8500. For that $8500, he gets 60 payments of $214.94. That is a annualized yield of 17.80% according to my handy HP 17BII. Not 69.7% return. As a note buyer, I would say that deal stinks! If I were you (a note seller), that is a good deal. To minimize your partner’s risk, guarantee the payments. These types of investors are very hard to find, keep him happy if at all possible.

If your partner wants to continue with the deal, you need to write up an Assignment of Interest agreement. This agreement would assign all of your interest in the note to the buyer (your partner). Again, I would recommend that you guarantee the note payments and take care of any repossessions that may be necessary. Your partner likely does not want to fool with repossessing a mobile home. That is why he needs you.

Seeling A Note… How Do I Structure It?? - Posted by Thane, MI

Posted by Thane, MI on February 20, 2001 at 08:45:28:

I just finished my third Lonnie deal. My wife and I are also closing on a quadraplex in a month and need to come up with some cash for the down payment. To do that I am going to sell my half of the note (I have partnered with a family member. He puts up the money… I do all the work… we split the payments 50/50) He and I are trying to figure out the details.

Here are the specifics: Paid $3,500 for the home. Sold for $10,000 with $500 down. Created a $9,500 note payable in 60 payments of $214.94 each. I was going to sell my half for $5,000. My partner would then have $8,500 invested and receive a 69.7% return in 60 months.

Could someone check my numbers and give some guidance on whether this is a good deal for both my partner and myself?

Thank you in advanced.

Re: Seeling A Note… How Do I Structure It?? - Posted by Blane (MI)

Posted by Blane (MI) on February 20, 2001 at 14:18:04:


Correct me if I’m wrong about any or all of the following:

Partner has $3500 in home. Receives half of monthly payment (107.47) for 60 months. This comes out to an annual yield for your partner of 27.3% as the deal stands. As Tim alludes to, it’s not something he’d be running after. But if you’re partner is happy with that rate, good for you.

One can see that if your partner wants the same rate of return on the other half of the payment, he would only pay you $3500 for that right. According to my little Radio Shack calculator jobby, if he was to pay you $5000 for your half of the payments, he would have to settle for a rate of return on your half of 10.5%. You wouldn’t exactly be doing him a favor methinks.

As Tim says, good deal for you. But to keep your partner happy, you may have to settle for less than the 5K. All numbers subject to hitting right buttons.