All Forum Posts by: Bill B.

@Christopher Brainard  

Listen to @Bob Malecki and @Jay Hinrichs before listening to anything I say.  They've forgotten more than I knew or know. 

But, my two cents:

The note holder is looking to receive a total of over $1.3 million in the next nine years.  

In my humble opinion, it depends on how long you've been making the $10k payments.  If the original term was 180 months, the previously suggested payoff of $800k is a lot more appealing than if the original term was 120 months.  And that balloon is quite a kicker!!!!

So, if I have this right.  (IF I have this right.) To calculate the return the calculator entries look like this:

Current facts

N             I/YR             PV             PMT             FV

108          6                 980,000    -10,000       -252026.51  (I solved for FV as it was not provided.)

Proposed Payoff 

N             I/YR             PV             PMT             FV

108                             800,000    -10,000        0                   

Then SOLVE for I/YR.  That calculates to 6.9876 percent. 

Again, I zeroed FV because you are extinguishing the debt, not purchasing a third party's debt.

Not much in it for the lender........IF (IF!!!) I'm correct with the calculator.

I hope the above calculation IS correct and that this is helpful.

Bill

I just re-read the original question:

I'm not at home to review my worn and dog eared copy of the book, but I believe that if you review the scenario, you'll find that the individual offering to accept a payoff of $8,000 is NOT the original lender.  Offering to accept an early payoff is a tactic Jimmy Napier uses to accelerate his velocity of money.

I think you'll find that the offer to accept $8,000 was made by someone who purchased the note at a price that was LESS than $8,000.

I hope this helps.

@Jeff L.

I see the problem now.

You don't have enough players in the picture.  

Person L (lender) loans Johnny $10,000 at 10% for ten years.

IMMEDIATELY after signing the docs to lend Johnny the money, person L's wife finds out and nearly goes postal on person L for lending that money because she wanted to remodel the master bathroom.

Person L learned shortly after saying "I do" that age old axiom "Happy Wife, Happy Life".  Therefore that ten year stream of income that would yield a total of $15,000 plus doesn't look like such a good idea anymore.

Enter YOU!!

You evaluate Johnny as a borrower and do ALL your other due diligence on the note and the borrower and feel it is a good risk and worthy investment.....IF Person L will sell you the note for $8,000 so that you realize your target interest rate.

Now.....this was not a politically correct post.  It was meant to merely bring a smile, not to offend.  If anyone is offended, I hope that  you will substitute "husband" for "wife" and "fishing boat" for "master bath"......hopefully everyone will see that there was no intent to harm or demean.

The difference is receiving an $8,000 lump sum NOW, instead of $132.15 monthly for ten years.  

You are correct that it is a $2,000 discount.  But if you had the choice, would you want $8,000 immediately or $132.15 monthly?  Depending on your situation, choosing either is "correct".

To put it in practical terms, if you needed to pay $8,000 for a bathroom remodel today, how valuable is the $132.15 per month stretched out over ten years?

Now for the flip side:

Someone has a note paying $132.15 for ten years.  That is a total cash stream received over all ten years of $15,858.  Paying that person $8,000 now (because he has to pay for a bathroom remodel) to receive $15,858 over a ten year period calculates to an interest rate of 15.6%.  That is just a mathematical fact.

I hope this is helpful.

Hi,

I believe I sent a colleague request yesterday.   I know that if the request is fulfilled, I get a notice in my inbox.  But, I'm doubting my recollection of the request......."did I hit send?"   I cannot find a way to check/review outstanding colleague requests.  I searched the forums for "outstanding colleague requests" and received zero hits.  

Please point me in the right direction.

Thanks for all you do.

Bill

@Martin Fletcher @Jay Hinrichs  Sorry for the delay in responding.  Thank you both for your thoughts.  In SoCal, it seems that people are gun shy to lend on ag projects.  Prior to posting, I'd called all the local farm credit companies and a couple of local community banks.  No joy.  

I was hoping that I was missing something, but thank you both for confirming that I was on the correct path.  We will continue to pursue this.  (Other research is beginning to make me believe that we don't have the resources to do the project, but.....I had to try.)

Thank you both for contributing.

Bill

Hello,

We own a 24 acre orchard.  We want to build our primary residence on the parcel.  There is no debt on the parcel.  Does anyone know of a financial institution that will do construction financing in this situation?

ALSO, are there financial entities that will cover the conventional first mortgage on the same property (agricultural orchard) when construction is complete?

Thanks!

Bill

@Karen Margrave Thank you for your time and help.  It is greatly appreciated.

@Karen Margrave

Thank you for your very detailed reply and the pictures.  

Does the $200k include the retaining walls and a complete foundation on which to build, or the dirt work only?  If it was the dirt work only, may I ask the amount to get to a buildable foundation?

If that number is anywhere near a surrogate for a buildable foundation for our project, we may (just may) be able to make this work.

Also, I FULLY understand that ALL is conjecture until an engineer evaluates our specific site.  I'm trying to determine if we are anywhere near able to do this.

Thank you again for your time and your thoughtful and detailed reply.

Hello Mr Exeter.

Thank you for your reply.  If this goes through as hoped, we may contact you for any B&B operators that you may know.   If this all works out, I'm sure that the family will make sure you are aware of the grand opening!!!  You'll love it!!

Thanks again,

Bill