Please help me with my first note purchase (2 Mobile homes)

[Dustin M.]

Hi guys,

Can you please evaluate this deal for me. I think it is a winner but I want to make sure that I'm not missing something. This will be my first note purchase so I hope it goes well.

I have been looking to get into mobile home investing for a while now. Today I talked to a park owner who was very helpful. He said he had a few mobile homes that he would be willing to sell to me cheap. He also told me he had a few notes that he would be willing to sell me. Here is the note that he gave told me about.

Mobile Home 1: 77 Fairmont Sold for $4,649 at 12% interest rate for 30 months.

On this the buyer needs to make 28 more payments of $154.99.

Mobile Home 2: 1983 Patriot sold for $4,635.32 at 10% interest for 28 months

On this the buyer needs to make 27 more payments of $189.18.

The park owner is willing to sell me both for $4,500 cash. I'm thinking that it might be worth buying but I just wanted to run it buy everyone in case I'm overlooking something. If I add up all the payments I would receive if the buyers pay each month it comes up to $9447.58. Does this mean I'm buying the note at
47% percent (4500 / 9447.58)?

[Jon Holdman]

Do not add up the payments.

One calculation is the one Locatelli did. Plug in the payment, number of payments and what you paid (the present value) and comput the yield.

Or, divide what you pay into the balance to get the discount.

Before you can tell if this is a good deal you need to know the value of the trailers and the credit of the borrowers. These are very green notes. If the value is only $1000 and he sells the note to you for $2250 he's making out like a bandit.