Yield on this note? - Posted by Levi

Posted by Michael Morrongiello on September 04, 2008 at 10:35:48:

Rick- is on target. What is the Note worth to YOU?

I will tell you a 5% interest rate loan involving an investor non owner occupied property will be discounted significantly.

As an alternative- you can have these note sellers go ahead and shop the market to find out what they can effectively sell their Note for in the marketplace. Then you come in and match or beat that price.

Depending on how your “first right of refusal” clause reads - it very well might induce them to do just that. If you clause is vaugue and not so well written, the onus will be on YOU as being required to make an offer.

However is your clause contains more detailed clarity like the one we include under the Creative paper clauses section of my Unity of Real Estate & “Paper” study course available here at CREOnline, then it will in essence seek the note holder to go out and find out what someone will pay them for their note (if at all)by obtaining a written offer from a bonafide purchaser. Now you sit back and wait, then decide whether to match or beat such an offer.
Continued best to your success;
Michael Morrongiello
Paper Practioner
Author of the following home study courses;

Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
The Unity of Real Estate & “Paper” - Advanced techniques for both the acquisition and disposition of properties using Real Estate “paper”

Yield on this note? - Posted by Levi

Posted by Levi on September 03, 2008 at 05:50:58:

I purchased a SFR rental property on land contract 21 months ago. I owe $30,000, 50% ltv. Payments are $371.23/mo, 99 pmts remaining, interest is 5%. I have good credit, all payments are on time and current. Seller has passed away and estate is being settled. I have right of first refusal to pay off the note. What is the approx. market discount rate I should consider for a note like this?

Forget market rates… - Posted by Rick, the Probate Guy

Posted by Rick, the Probate Guy on September 03, 2008 at 17:48:48:

Figure out what it’s worth to YOU to pay off note early (or buy it at a discount). If someone told you the market rate is a 5% discount from face value, would you get excited about that opportunity?

So, I would figure out what it’s worth to me (now) to offer should this happen. Alternatively, consider offering the estate the ability to “upgrade” the security and substitute a different property of equal or better quality/equity/loan position. Preferably that would be a property that you’d want to keep long term and the cheap financing makes it even more attractive.

Remember to keep reviewing the “box of benefits” to see how else you might make this deal mutally profitable.

Lastly, please follow up on this board and tell us what you end up doing, OK?

Re: Forget market rates… - Posted by Levi

Posted by Levi on September 04, 2008 at 06:23:53:

5% discount, no i wouldn’t be excited. I think the market discount on something like this is probably closer to 20% to 30%. I don’t want to pay more for it than a typical note buyer.