Trying to understand all the percentages terms, when come to borrowing and pay backs.
I understand there is an APR that you pay banks to loan money. If you have a debt partner that wants to put money in the deal, APR still used? based on month/year or is the same? simple vs complex interest. I can calculate the ROR, is that what I can/should pay the partner? I can calculated COC return, or is that what I pay the investor and how?
Looking for examples of how would pay investor that say... is just a debt partner
I have some deals coming up and have done the calculations. I am trying to keep banks out and investors in. How do I calculate what they are getting
Thanks for all that reply
The great thing about investors and terms is that it's all negotiable. However, as a debt-only investor, most are going to want 10-18% percent return, safety in the form of a first or second position lean on the property, and a solid deal, given they know what they are looking at.
In terms of how to structure the loan, you can pay interest only monthly payments with a balloon payment sometime in the future. You can amortorize the loan over a set period. Like I said, all negotiable.
Yeah that part I got. Maybe ask a different way. What are the calculations to see what I would pay at a certain rate. If they put in 100k and want 15%. Is that 15% ROR or APR?
I guess hard to ask when not sure the terms
Looking to see the numbers calculated out and what it is called paying out an investor.
if you structure the terms as simple interest only at 15% on 100k then your calculation looks like this:
100k x (.15/12) = 1250/month
100k x.15 = 15k / 12 = 1250/month
I'm not quite sure what ROR is, but if you are referring
Sorry my post got cut off. But if you are referring to a simple return metric and investor would use, you're most likely to see COC,ROE, IRR OR MIRR.
Ahh yes! There we go. Thank you Logan
ROR is rate of return from what I know
If we use that 15% simple interest. Is that the ROR or more commonly IRR and that's the calc I would use to pay investor? Or course if 15 and simple is what we agree too
So these numbers are usually calculates yearly.
I think I'm getting the terms and calculations.
No problem, glad we are getting closer hah. In this instance, the 15% simple interest payment over the course of 12 months would be considered the ROI (Return on Investment) for the investor. IRR and MIRR are return metrics that are a little more complex. They consider all cash flows (negative and positive) and then discount them back to today's dollars using time value of money. It's best calculated with a calculator or an excel function and used for an investment longer than a year.
From the investor point of view, it looks like this for a five year period:
Cash Flow (CF) 0: -100k
CF 1: 15k
CF 2: 15k
CF 3: 15k
CF 4: 15k
CF 5: 115k (interest + return of principle)
IRR changes as the interim cash flows differ from year to year.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!