J Scott Analysis

11 Replies

Hey Jay,

I'm using the CUMPRINC( ) function in Excel that will calculate the accrued equity based on the rates/terms of a fully amortized loan.

I'm not sure what your formula is calculating, but as best I can tell, it's just pure coincidence that it's anywhere close to the true number.  :-)

Thanks J for quick answer.

My formula:

mortgage payment that I pay (2129) times 12 months minus 7% of loan amount (320000) = the amount that goes towards paying off the loan and buying me equity.

Am I missing something?

@J Scott undefined

Originally posted by @Jaago Viitkin:

My formula:

mortgage payment that I pay (2129) times 12 months minus 7% of loan amount (320000) = the amount that goes towards paying off the loan and buying me equity.

Am I missing something?

Ah, now I see what you're doing...

Where things went wrong is, in the example, the mortgage is fully amortized over 30 years, not simple interest.  Your calculation of 7% of the loan amount would assume a simple interest payment of 7%, which would fix the interest portion each month.  Instead, because the loan is amortized, the interest you pay decreases each month, while the principal portion increases each month (less interest paid as the principal decreases).

So, in your calculation, you're assuming more interest is paid than would truly be the case.  That means that in your calculation, the second operand ("7% of the loan amount" -- what you expected was the interest paid throughout the year) is actually smaller than what you calculated.  As a result, the difference (the equity accrued) is actually greater than you calculated.

In this case, the interest calculation was off by about $103 -- you pay $103 less than you calculated using simple interest, so that's $103 more that actually went to principal pay-down.

Does that make sense?

@J Scott 

Perfect explanation :)

Thank you so much.

PS! I read your book about flipping last week....good stuff. I just sold my first flip yesterday. I was lucky and made 20% but my calculations were weak compare to yours. THANK YOU FOR SHARING, I WILL USE YOUR's FOR MY NEXT FLIP 

  

@J Scott 

Hi I wanted to ask do you have a similar calculator for your flips?

I know the BP calculator, but I am a number guy. I need to know the formulas and what is behind the results.

I also have your spreadsheets,(I bought your books) But do you have an excel sheet with all the numbers you need to know do evaluate flips?

Something to use when I go over potential deals?

THANK YOU J 

Originally posted by @Jaago Viitkin :

@J Scott 

Hi I wanted to ask do you have a similar calculator for your flips?

I know the BP calculator, but I am a number guy. I need to know the formulas and what is behind the results.

I also have your spreadsheets,(I bought your books) But do you have an excel sheet with all the numbers you need to know do evaluate flips?

Something to use when I go over potential deals?

THANK YOU J 

Did you read the chapter in the book about The Flip Formula (or check out this blog post)?

That *should* be everything you need to know to evaluate a flip deal.  What other information were you looking for?

Happy to provide what I can!

@J Scott 

Thank you J

 I have seen them, I will put something complete together for me.

THANKS AGAIN

@J Scott 

Last night I did not sleep much and built an excel calculator with all I care about on one page :)

Went through your book again and re-listened both podcasts with you :)

I have a question you are talking about your first flip and how it did not work out so good and you had to use lease option.

I am thinking to do my next flip and go into the deal knowing I will use only lease option.

I seemed to me you did not like it? 

WHY?

This guy here is explaining that this is the only way to sell and you will get the same amount of cash in your hand after 6 months. No matter regular sale or lease option,,,,plus you have the tax benefits!!

https://www.youtube.com/watch?v=U7KfcnMgHYM

WHAT AM I MISSING??? 

Thank you

Hey Jay -

The reason I don't like Lease Options as a backup exit strategy is that, if it's a backup strategy, that means a rehab has already been completed.  Once you complete a rehab, the last thing you want is to put a renter in there.  Now, in theory, someone who lease options is eventually going to buy the place; but in reality, that doesn't generally happen.

And if that doesn't happen, that means you eventually need to do another rehab if you plan to resell in the future.

Also, I'd say it's tremendously unlikely that a lease option buyer will execute the option within 6 months.  Generally, they have credit issues they need to resolve, and that can take years (if ever).

Just my experience!

@J Scott  

@J Scott  

You make an interesting point, I have been involved with 100's of seller financed deals as an exit, and if you do not "condition the renter" to act as a homeowner in training, yes you are correct.

My success rate is over 85% within 24 months. 

And I like pretty houses, lease option assignments, sandwich lease options, sub2 then lease option, wrap then lease option.

It is all about finding the right tenant buyer, wants to own, has down payment, has dti thats reasonable, mild credit issues, willing to build new trade lines to increase FICO.

@John Jackson  may want to chime in.

Hi Scott, I about to start flipping homes. I am looking for a mentor and some advice recommendations. I have received lots of information from your sitehttp://www.123flip.com/. However I have not bought your book yet. Any advice on the flipping journey.. ( LLC and asset protection, Team(Attorney, Contractors, CPA), Deal analyzers/calculators- There are lots of these calculators, which is the best? Thanks

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