All Forum Posts by: Adam Zacharski

I've noticed reading through a lot of posts that when people are calculating their equity in a deal after a certain number of years they are not breaking out the expense portion of their monthly payments. They often take the mortgage payment x years and add that to their equity. Because mortgages are amortized to have an accurate idea of principal paid down you need to allocate the interest from your payments. The issue is that the amount paid to principal and interest changes for every single payment. Lucky there is an easy way to figure this out with either Excel or Google sheets. Just enter in the following formula and it will tell you what the remaining loan balance is at any point in time, with which you can subtract it from the original balance to see what you have paid off. 

The formula (future value calculation)

Numbers you'll need: 

->Original loan amount - ex. $100,000

->Interest rate - ex.  .10 for 10%

->Monthly loan payment amount -if you don't have this I'll show you how to calculate it below - ex. $1,074.61

->The loan balance date, viewed as how months you've paid into the loan - ex. 5 years = 5 x 12 payments = 60

Formula break down =fv([interest rate/12],[loan period you want to see],[monthly payment],[beginning loan balance as a negative #])

In action our formula would look like this =fv((.10/12),60,1074.61,-100000) 

Our answer would be $81,316.24 as the remaining loan balance after the 60th payment i.e. 5 years. This means that we have $18,683.76(100,000 - 81,316.24) in equity from the loan. The total payments for the time period have been $64,476.60(1,074.61x60) so we paid $45,792.84 in interest over the five years. If you didn't factor this in then your equity assumption would be off by the interest or 71% of your payments. 

If you don't have the monthly payment number you can calculate it like this: 

The formula (payment function)

Numbers you'll need:

->Original loan amount - ex. $100,000

->Interest rate - ex. 10% or .10

->Loan term in numbers of months ex. 15 year = 15 x 12 =180

Formula break down =pmt([interest rate/12],[loan term],[beginning loan balance as a negative #])

In action our formula would look like this =fv((.10/12),180,-100000) 

I'm looking to see if anyone has a recommendation of a real estate broker in Hudson County NJ, ideally with experience with FHA financing for multifamily housing. I've been searching for a 4-unit but I'm not very familiar with the neighborhoods in Jersey. Any help would be greatly appreciated!

@Jason Nguyen The homeowner always pays 10% per 6 months. If the investor purchases the lien for 1% the county keeps the remaining 9%. In nassau county it doesn't seem to be an interest play, you buy the liens in the hope that the homeowner doesn't pay them back so you are given the deed to the property. 

Hey, 

I wanted to introduce myself and thank all of the knowledgable and passionate people on this site. I hope that one day I'll be able to give back as much as so many of you have contributed.

In the pursuit of experience I want to lend myself to those who are in the need of anything. I live in Brooklyn and happy to lend a hand around my work schedule. I'd also be more than happy to assist with financial modeling and projections or double checking assumptions. 

Feel free to reach out as I will be doing the same!

Adam 

@Keith Thompson why was the IRS in a position to pay you back if they had a lien against the property? 

Basically, the prior owner did not pay the real estate taxes on the property. Those unpaid taxes stay with the property until they are paid off. If you "win" those properties the county will come after you to settle the debt. Often you cannot sell or finance the property if it has an outstanding lien. Beware of IRS and mechanics' liens which also stay with the property regardless of owner.

They do it by township and over several days, q+d I think there were +-8,000 liens @+-$60M 

They would go down the list really fast but it was annoying to hear the auctioneer start at 10% and count down to basically 1% for each lien

The day I went there were 15-20 registered bidders but the majority of the sales went to a handful of people. It's not an interest play, in Nassau after two years the county can transfer the deed to the tax lien holder. The deed is cleared of all liens, except for mechanics and IRS. 

So the strategy seems to be buying 100 liens at low or no interest and maybe a tiny fraction don't get redeemed and you have a huge windfall by acquiring the property. 

The purchase price reflected the delinquent real estate taxes, the variable component was the interest rate. The interest is charged bi-annually at a maximum rate of 10%, and the investors bid down the interest they are willing to take. The day I went the range was 0 - 1.5% / per six months.

I went to the Nassau county tax lien auction in Feb 17 and picked up 11 liens. Only Nassau and NYC hold tax lien auctions and individual investors are not allowed to the one in NYC. The remaining 60 New York counties hold tax deed auctions, where you purchase the property from the county who foreclosed on the delinquent property.