All Forum Posts by: David Fernandez

@Dave Foster and @Bill Exeter Wow, thank you very much for your info. You summarized in one post what I was looking for!

However, I have an additional question. It seems from one of your posts that the tax payer form the old property must be the same tax payer in the new property. My wife and I bought an investment property a few years ago under both our names and we would like to do a 1031 exchange with a different property we already like. However, we would like to purchase this new property with our LLC.

Can we do a 1031 with our LLC or we have to be on the title?

Thank!

David

Hi @Dan Oliver, just signed up in your website to be part of your buyer's list. I am based in Miami and I am currently looking to invest in the Tampa area. Thanks!

@Eric Tenenbaum This is just an example I created to understand how to evaluate notes. It is possible that there is a note out there similar to this one, but I didn't type the numbers based off a real note.

@Don Konipol and @Roman M. Thanks for your reply! I understand that my yield can be different if certain scenarios happen. However, at this point, I just want to understand how to financially analyze a note performance, so I can compare between them.

Obviously, when I narrow down my selection, I will do a proper DD with an O&E report, BPO, and LTV, property condition, property value, payment history, possible exit strategies, etc. will be critical in my decision making process, but I am trying to figure out whether this example note is a good financial investment and then be able to run the same analysis on other notes and compare them to select those that seem as better options.

Also, I didn't know there is a ROI formula in Excel... I always calculated my Net Profit and divide it by the cost of my investment. Here's where the NPV question arises: what rate should I use to calculate the Net Profit NPV? IRR, current note rate, or a rate that I consider my WACC (as I do with my other RE investments, although here may be different because I am not using debt to finance the purchase)?

In the example above, I get the following results:

- IRR = 8.45%

    - Net Profit NPV (Total returns - Cost) = $6,992.79

- ROI = 28% (NPV/Cost = $6,992.79 / $25,000)

Are this indexes the right ones to evaluate a note performance? Should I be calculating / looking at something else?

This is only the financial analysis, then I will have to perform a more in depth analysis about the note (FMV of the property, title, encumbrances, etc.). Until I have a better grasp of notes, I will be only interested in performing notes that are 1st liens.

Hi!

I invested in RE for a few years now. Usually, most of my investments are buy property and rent it out for positive cash flow or sell them for profit. I am more used to analyzing short term investments rather than long term.

I got offered some notes to purchase and I started doing some research about investing in notes. I read lots of posts here at BP and I am incredibly thankful for all the advice you all share. Without your inspiration, I would not be considering this new investment route.

However, although I can analyze an "standard" real estate investment (what I've been doing until now) easily, I am having some issues analyzing a note investment. For example:

    - Property Value: $60,000

    - Original Balance: $42,000

    - Unpaid Principal Balance: $31,000

    - Remaining Term: 18 years

    - Rate: 5%

    - Monthly Payment: $227

    - Note Purchase Price: $25,000

I get an XIRR = 8.45%. However, I am not sure how to go from here.. How do I calculate ROI? I am also interested in knowing the NPV of the total amount I will be paid through all 18 years and subtract the purchase price to know what are my earnings; what interest rate do you use: current loan rate / gross yield / finance rates , etc.? Annualized of monthly?

Any other values and/or indexes that you look at?

Thanks a lot and I apologize for such rookie question...