Valuing a Performing Private Note

[Matt Inouye]

Hello BP Gang,

Just a little backstory... I was fortunate enough to purchase a home via seller financing with pretty sweet terms... 35 year amortization at 4.04%.

4 years down the road and now the original property owner (now owner of note) is needing a large sum of money and I am contemplating closing out the note at a discount.  I am hoping some note investors might be able to share some insight as to how they might value a performing note and what they would offer to acquire it.

Stats: 

$650,000 - Property Value

$458,000 - Property Purchase Price

$418,235 - Original Loan Balance

$391,941 - Unpaid Loan Balance

376 months - Term remaining (420 months starting term - note has never been delinquent or in default)

4.042% - Interest Rate

$1,862.88 - monthly payment

Any advice on how to look at the deal would be great as I am primarily a multifamily investor and not as familiar regarding the nuances of note investing.  Also, what are tax implications if a debt is settled for less than the original amount due.  Do I pay taxes on that similar to debt forgiveness?

Big time mahalo in advance!

Matt Inouye

[Logan Hassinger]

@Matt Inouye

With the property being in an borrower friendly state, you may also run into additional discounts. 

You got it, pricing should come in around there. That’s also a strong credit score.