Note Business Tip of the Month 

September 2009

 

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This year we have added a Question of the month to this regularly scheduled "Tip of The Month" e-letter. If you have a question you would like to see answered in this newsletter just email Jeff!

 

*Tip of the Month: 

       Did you know....

           Sometimes it is necessary to actually pass on a potential transaction that just sounds too good to be true? (Because, it probably is.)
         

*Quote of the Month:

         Some will like what you do and some won't.  Don't let the people who don't like what you do keep you from doing what you do.

 

                                                                                        - Charley Johnson

*Question of the Month:

 

Q -   Hi Jeff, you recently passed on giving me a price on a note that I found and you said that because it was a flip you wouldn't be able to do anything until it is seasoned for at least 12 months. You told me to have the note holder keep an excellent payment record and get back to them when they have 12 months of seasoning and you would be able to look at it then. Well, I passed this on to the seller. They asked if an appraisal would help (one that we would order not one they already have) I told them that I thought this was only part of the issue. The second issue would be that the payor could make the payments for 12 months. But, I thought I would at least ask if we conducted an appraisal and if it appraised at a sufficient value, would this make this transaction move forward any earlier? Let me know. Thanks! - Ed T.

 

A - Hello! Nice but no. You are correct in that the value is only part of the issue with rehabber/flipper paper. Doing an appraisal now even if it appraised for double the sales price wouldn't help. Remember we buy notes for the cash flow and one way to lessen the risk of default and foreclosure is to let the note season for 12 months. With the rehabber flipper paper the industry statistic is that nearly 7 out of 10 rehabber/flipper notes default in the first 12 months. SO if the note is still around in 12 months and they have had on time payments the likelihood that the payments continue is much, much greater.  TWITA! 

                                                        Jeff
*Calculator Problem of the Month:

 

At the request of many of the subscribers to my monthly email newsletters and tips we will now have a calculator problem every single month for you to solve, using the simplest calculator for the note business the HP 10BII. This month we will calculate out the current balance of a note on a fully amortized note:

 

Note terms - $74,000 note, amortized for 30 years at 6.5% interest, fully amortized, no balloon. Verify the current balance if 28 payments have been paid:

 

1) From last month we calculated the payment amount and this is what we know

 

    N   = 360

    I/YR = 6.5

    PV  = -74,000

    PMT = 467.73

    FV  =  0

 

        N    I/YR    PV      PMT    FV

     360   6.5   -74,000   467.73  0

 

With 28 payments paid already we would calculate the current balance as follows:

 

2) Subtract the number of payments paid from the starting number of payments and change "N" to the difference.     360 - 28 = 332

 

        N    I/YR    PV     PMT    FV

      332   6.5   _?_   467.73  0

                       

Change "N" to 332 and solve for "PV" (push the PV button):

 

    You should have gotten...   71,983.26

 

The calculator will show it as a negative number but we know it is positive. Did you get it? The current balance for this note after 28 payments is $71,983.26. Great job! More to come next month!

  

Jeff's Speaking and Instructing Schedule

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Contact Jeff today for information about having him Speak or Teach to your group!

Jeff Armstrong is President of Armstrong Capital. He is a member of the Million-Dollar Club, a Master Broker, visiting instructor for the American Cash Flow Institute, instructor for Nouveau Riche and the author of several best selling industry books. He can be reached by calling 800-845-3055, faxing 818-865-2323, e-mail jeff@armstrongcapital.com, or visit www.armstrongcapital.com and click on "Note Brokers" for a quote on a note, answers, articles and information about his Master Buyer services and how Armstrong Capital can help you succeed.

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