All Forum Posts by: Joshua Andrews

Thank you Bill!

I'm curious to learn how everyone is verifying a note is still secured by the property after a BK or Foreclosure. I'm thinking a recent title report pulled.

Anything else I should be looking for?

Appreciate the feedback.

Josh

Thanks Charles!

Good point Dion. I recently discontinued working at the financial institution as an LO so I don't have access to their credit pull system. I did put a call in today though and believe I have it figured out. Thanks for the feedback!

Josh

What service have you guys used or recommend to pull credit on borrowers when doing due diligence on a file?

Appreciate the feedback!

Josh

@Dion DePaoli

Thank you for the excellent feedback. I understand the point your getting at. What I was referring to is in the simular vein of what Nick B just mentioned.

Basically figuring out how much of the note proceeds could be used as spendable income (like at retirement) without eating into my principal. That's more of the idea I was getting after.

Your absolutely correct on the 14.57% being compounded which is something I had not considered fully. Appreciate your posts and learning a lot here, thank you.

Josh

I'm glad I saw this thread. I can see how this subject gets easily confused. I've been looking at note returns, with a focus on IRR. However I am also looking long term and calculating how compounding will affect my retirement given certain basic cash on cash returns.

Speaking strictly about note income, it's my understanding that IRR accounts for the time value of money including principal and interest portion of the payment. Naturally the amortization schedule is not constant with regards to how much of the payment is principle and how much is interest.

So, I'd like to ask if my assumptions are correct using the above example. For a basic cash on cash return here is my understanding of the above example. Please correct me if I'm wrong or a better more efficient way to do this.

Using above example:

Purchase Price = $22,900
Gross Payments (annual) = $3,516
Annual Servicing Fee = $180
Net Payments (annual) = $3,336
Payment Yield = (3,336/22,900) = 14.57%

Life Time Payments = $104,601
Life Time Service Fee = $5,355
Life Time Net Payment = $99,246

$99,246 - $22,900 = $76,346 actual profit over life of loan

So taking $76,346 and dividing over 357 periods we get $213.85

$213.85 x 12 months = $2,566.25 per year total PROFIT return. I realize this is not even each year and is only an overall return if the loan follows to the end of amortization.

So $2,566.25 per year / the purchase price of $22,900 = 11.20% cash on cash return.

Is this a correct assumption, or is there a better way to figure out cash on cash? I realize IRR is more important. The reason I'm looking at cash on cash is to do projections in a compound interest calculator over long periods of time to see what my actual cash flow PROFIT will be.

Is this correct or is there a better way to do this?

Thank you!

Josh

That's actually a super simple and great idea. Thanks for the feedback Pat!

I'm aware that when investing in 2nds one important factor for many folks is to make sure the 1st is paid current. I can see how this is easily accomplished at time of purchase through a credit report. However, over time are there other methods that can be used to monitor that the 1st is being paid?

Thanks!

Josh

Ok thanks guys I appreciate the feedback!

Josh