Need Help Analyzing a note

6 Replies

This is a performing note you are showing, so the first question is what kind of yield do you require? Of course the yield you require will also depend on the riskiness of the note. So think through what the scenarios are if the note stops performing. What will be required in this state to go through a foreclosure in terms of time and money? How much equity is or isn't there, and what happens to your return if the note heads south and you do have to take the property back? There is more to it than this but hopefully it gets you started.

@Adit Shah

Looks like Dan got you off on a great start. One thing I noticed is the loan term and how short it is. If you do buy this your exit is quite limited as because most note buyers are looking to collect interest. In this case, almost all of the P&I payment is going to principal. I know the loan amount is very small and you may be looking to test the waters of notes, but to me this one in particular doesn't make a whole lot of sense.

A couple other things: 1) This was just originated in June and they appear to be behind by at least one payment already (paid 12/3 but next due is 11/30). So, personally I would not value this as much as a typical performing note with 9 to 12 months of on-time payments. 2) Be careful about posting things directly from Paperstac (or any other site) like this. It could be a non-issue but it also might border on breaking their NDA policies.