All Forum Posts by: Jeff L.

I'm very organized and have all income, categorized expenses, and tax deductible items broken down by property in a spreadsheet. Will also provide all supporting documents in PDFs. I'm the dream client to work with.

Willing to work with an online CPA (as I've done in years past), or a local one here in Orange County. Please give me some recommendations.

Thank you!

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Interested in this even though they're closed to new investors at the moment.

Questions for people that are currently investing with them:

1) Under their FAQ, it says they distribute 12% to each investor first, then "return to Investors all of their invested capital." What does the second part mean? So do they actually give higher than a 12% return, or are they just buying you out of your initial investment (after they've returned all your investment, are you still invested?). Can you give me an example of a monthly distribution you've received from them, let's say with an investment of $1000.

2) Are there any fees?

3) Is your investment secured by anything?

4) Any other opinions about this fund? Has it been working great or poorly for you? How much have you invested with them?

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I'm looking for a way to passively lend into a note fund, or crowdfunding fund, or real estate developer/company.

But every one I've seen so far has been offered to accredited investors only.

One example is PPR's Note Fund, but there are a bunch of other ones I've looked at too. All accredited investors only.

Are there any funds that you know of that are available to non-accredited investors, that pay 10+%?

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Note that it doesn't have to be a note fund. It could be a hard money lender fund, or anything related to real estate, etc.

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Originally posted by @Linda Hastings:

@Jeff L. Looks like I have a different version of the book than you (mine is copyright 1994, 2013). The scenario you described appears in a slightly different format on page 62 of my copy. It begins with this premise in mind "The true rate of interest you are paying depends on the amount of discount the person you owe would give you."

Taking the example of "Johnny" (in my book it just uses "you" and "me") owing you $10,000 at a stated interest rate of 10% with payments of $132.15 and 120 payments. Although @Gail Greenberg brings up a good point that what you originally paid for the note will make a big difference, in this case, the hypothetical example is written assuming you originated the note to Johnny and he actually owes you $10,000. The point the book makes is that if you would not give Johnny any discount if he paid you off today, then the interest rate would, indeed, be 10%.

Then it goes on to look at the case where you tell Johnny you will give him a discount and his debt can be satisfied if he pays you $8,000, provided he pays you in three days. What is the interest rate that Johnny is actually paying if he takes you up on the $8,000 payoff? N=120, PMT=-$132.15, and now PV=$8000. If you solve for I, you get the 15.6% you mentioned in your original post. The whole point of the example was that you should never trust the numbers written on the face of the documents because as soon as you change one, the others change. The numbers are a matter of negotiation, and you should be negotiating to see if you can change them in your favor.

As to why you might offer this type of discount, it hinges on the fact that you have placed a short time limit on your offer. You don't know if Johnny is about to sell the property, in which case you would be getting a full payoff out of the closing proceeds anyway. Napier argues that if someone asks you for a discount if they pay you in full, giving them a short timeline may end up starting a dialogue with the borrower about what is happening, and it reduces the chance they will actually pay you off short. He says most people would miss the deadline for the discount rather than raising the money.

If Johnny does end up paying you off early, then it goes back to Gail's point about velocity of money. You have $8000 NOW to re-invest in something else.

Thanks for walking me through this Linda. Bill too.

I understand why giving someone $8,000 instead of $10,000 for the same payments is a higher rate of interest.

I still don't understand how this is in my favor if I offer this discount. So I gave him $10,000, he immediately pays it off with $8,000...I can now reinvest $8,000 but how did I win in this situation? The whole "the interest rate is now 15.6%" seems irrelevant here?

Is it just a bad example or is there something I'm still not getting?

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This is from page 98 in the book.

Johnny owes you $10,000 -- interest rate is 10%, payment is $132.15, number of payments is 120.
He's going to sell his house so he asks you for a discount if he pays it off now.
You agree to satisfy the debt for $8,000, because the interest at $8,000 is now apparently 15.6%.

Can someone explain this to me? Why is this transaction beneficial to you? You just lost $2000. Why is the interest higher? I must be missing something about present value, which is a concept I'm still trying to grasp.

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Originally posted by @Cody L.:

Wow. Lots of long answers. Let me simplify.

Consider two $50k notes: One on a $60k property, and one on a $200k property, both paying the same interest, which one would you rather have and why?

Which borrower would be more likely to stop paying and walk from their property and why?

This should help you understand why people like their notes to have equity behind them.

That's a really simple way to explain it. Thanks!

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Originally posted by @Mazen Al Ashkar:

@Jeff L.

if you go to foreclosure, you would be getting the 80k (amount owing to you) + fees, etc...

If you foreclose and sell, don't you get all of the proceeds? So 100k? Why only 80k?

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Thank you @Patrick Liska @Patrick Desjardins @Jordan P. @Joshua Andrews @Joe Hughis @Mazen Al Ashkar for the detailed responses.

I understand it more now. It's a safety buffer.

My question is: as a note investor, you didn't originate the loan. So why do you care about the unpaid balance of the loan? Being "made whole" only means getting back what you bought the note for (plus expenses).

For example, if the house was worth $100k, the borrower had a loan for $80k, and I bought the note for $40k...foreclosing would net me $60k profit regardless of how much equity the borrower had in it...right?

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I've been reading the basics of note investing, and keep coming across people recommending buying notes that have a lot of equity. I don't quite understand it and was hoping you guys could explain it to me (I'm sure it's a really basic concept I'm just missing).

How does equity come into play in notes investing and why do you care about it? When looking at purchasing a note, why does equity matter?

Aren't the numbers you care about mainly 1) the price of the note and 2) the as-is value of the house (the price you'd sell it at in case of foreclosure)?

Some basic examples with numbers would be amazing. Thank you!

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All Forum Posts by: Jeff L.

Jeff L. has started 51 posts and replied 108 times.

Post: Looking for CPA in Socal (Irvine, Lake Forest, Costa Mesa area)

Post: Looking for CPA in Socal (Irvine, Lake Forest, Costa Mesa area)

Post: American Homeowner Preservation (AHP) Fund

Post: Passive lending funds for NON-accredited investors that pay ~12%?

Post: Help me understand some math from "Invest in Debt" by Jim Napier

Post: Help me understand some math from "Invest in Debt" by Jim Napier

Post: Please explain a basic concept to me: Equity

Post: Please explain a basic concept to me: Equity

Post: Please explain a basic concept to me: Equity

Post: Please explain a basic concept to me: Equity