Note Buying - calculating Yield and discounted price

[Ron King]

How do I do my due diligence on notes so I know how much to buy it for? and what my Yield will be?

I tried plugging in some numbers to a financial calculator from an example of someone elses deal and did not get the same numbers he got.

[Ellis San Jose]

Your buy formula is a personal choice as far as target yield.

Due diligence in broad terms covers:

1) marketability of note, legal, etc. documentation

2) the borrower (credit worthiness, payment history)

3) the collateral (equity, other liens etc.)

If you are proficient with a financial calculator make sure your settings are correct for # of payments per year.

to calculate "i"/yr

enter "n" number of remaining payments

PV= the price you pay for the note if its $50,000 enter - 50,000

PMT= scheduled monthly payment if it's $500 enter +500

FV= usually "0" if it is fully amortized (if there is a balloon enter that number +)

Most people get tripped up on when to use a negative or positive number.

then press "i/yr" that will be your annual expected yield