# The math of MH notes - Posted by Bryan-SactoCA

Posted by Bryan-SactoCA on March 08, 2003 at 19:56:02:

I just took \$6000 and multiplied it by .065. Simple-and simply stupid. I need to dig up my financial calculator that I bought a few years ago when I was following the stock market.

The math of MH notes - Posted by Bryan-SactoCA

Posted by Bryan-SactoCA on March 08, 2003 at 11:58:01:

One thing I didn’t understand in Deals on Wheels is how Lonnie figures his payment amount and yield. Look on page 34-he says that his buyer signs a \$4,500 note at 12.75 interest (too high for today’s market, IMO), for 30 months at \$175.96/mo. Where does the payment amount come from? And how is the yield figured from seller’s price?

So say that I find a MH for \$5000, which is low in my market. I get an investor to pay the \$5000 and he gets paid \$325/mo at 6.5% interest for 30 months. I sell the MH for \$14,000 with payments of \$910/mo for 30 months…I think. If that is correct, then I take the \$910 every month and subtract \$325, which leaves me \$585/mo. These numbers don’t look right, either because of the higher amounts involved, or my math is wrong, or the term is too short (I know Phil suggested Heather do a 7 year term). Help!

Problems with the math - Posted by Diane (TX)

Posted by Diane (TX) on March 08, 2003 at 18:06:31:

To figure the \$175.96/mo payment, work through using Lonnie’s article on financial calculators: http://www.creonline.com/articles/art-200.html . You have three of the 4 variables (N=30, I/Y=12.75, PV = 4500), so you compute the 4th variable. You probably need to reset your calculator to clear out other values. Read your calculator’s manual for how to reset.

12.75% interest is too high for today’s market? Huh? High for used, depreciating MHs with poor credit quality buyers with no institutional financing?

I don’t know where you’re getting the \$325/mo investor figure, and I also think that it’s unrealistic to expect an investor to lend you money at a 6.5% rate. You’ve got to make this worth their while. Lonnie’s deal is he puts up the cash, then gets all payments until cash is recovered, then 50/50 split with the finder.

If you have a note for \$14,000, 12.75% interest, 30 month term, I computed the payment to be \$547.44. That payment, with lot rent, may be too high for your borrower. Lengthening the term means lower monthly payments.

Now go reset your calculator and read Lonnie’s article.