math question on return

[Rich Weese]

I'm normally good with #'s, but don't know how to calculate this one. Help an old fart out, college grads...

I have a subdivision where I've built a few homes in SO TX. I was approached by an individual that bought a lot from me awhile back and was going to save up funds to build an investment home. Makes excellent money, spends a lot and can't qualify for a loan. He wants the following:

I build a home on the lot with my cash. He signs a loan with me at 6% interest, payable $1000 PER WEEK till paid.I can build a very nice 4-2-2 home for around 90K. I sell to him at 125K, which is still under market value. I'm secured with the equity in the lot and have all my funds back plus a profit in 2 1/2 years.

My question for the math guys out there is- What is my annuallized return on the funds? He starts the payments when I start the home, and home built in 120 days so I'll actually be using 17 weeks of his funds to assist in costs.

Not worried about the payments being made, so just help with the return. Above my math level! Rich

[Jon Holdman]

I get 33.5%. A $125K loan at 6% with weekly payments of $1000 has a term of 135 weeks. But you say it only costs you $90,000 to build the house. So, your investment is only $90K, not $125K. A $90K investment (i.e., you bought the note at a discount) with 135 weekly payment of $1000 is an annual rate of 33.5%.