1 position performing note, typical discount?

[Logan Turner]

Say I have a first position performing note, what is a typical discount I should expect to give when selling? This example, principle $ 92,xxx, 10 year term at 10 percent interest. I'd imagine the interest rate plays a large role in what discount is given, along with house value, down payment and credit score of mortgagor.

[Bob Malecki]

Originally posted by @Logan Turner:

Thanks @Bob Malecki

So by return are we talking about annual return?  Can you double check my numbers/scenarios here...  note principle is 92k, interest 10% payments remaining 111/120.  Monthly payment $1256

total note collection remaining $139,416. So in order to estimate annual return do you subtract note purchase price, say 75k.. and then divide by years remaining 9.3 then take average annual gain and divide by original price of 75k?

139,416 - 75,000 = 64,416. 64,416 / 9.3 = 6,926 6,926/75,000 = 9.2% annual ROI.

or is it simply gross annual collection / purchase price? 15,072 / 75,000 = 20.1% but that doesn't factor principle repayment and of course is this collection 3 year or 30 years.

Thanks for sharing your knowledge

 For a rough calculation you could take the annualized P&I payments / the purchase price. 1256*12= 15,072 / 75000= 20% annualized return

I use a simple xls spreadsheet with Present Value (PV) macros to calculate my offers based on P&I payment and remaining term.  at a 10% return your selling price would be $90,725.27. If you sold it for $75K the buyer would get a 15% return.

Here is a screen shot using your calcs at a 111 month remaining term:

Hope this helps!