Issue III - October, 2003

How To Structure a Note To Sell at Closing

With the title seasoning issue thrust upon us, owner financing your property, then selling the note at closing is becoming an acceptable technique of financing your property. For those who are not familiar with the situation, it goes like this.

If you want to sell your property quickly, or if the buyer has "dented credit", traditional financing is not always feasible. With owner financing, the buyer makes the down payment, and the seller takes back a note for the balance. The seller becomes "the bank". Because the sellers want immediate cash, they will then sell their owner-financed note at closing, to get a lump sum cash payment. More>>

Time Value of Money Can Make You Rich
(Continued Part III)

The time value of money is the study of the relationships of 5 variables. Let's review the variables again.

PV - Present Value
FV -Future Value
%i - Yield
N - Number of pay periods
PMT - Amount of payments


Buyer Beware ...


Definition: Simple Interest
Interest earned only on the original principal.
For example, if you placed $1000 in simple interest bearing account paying 10% annually, the first year you would receive $100 interest a year. 10% x $1000 = $100. In the second year you would also receive $100 interest based on the same calculation. The $100 annual interest will be constant for the life of the deposit because it is calculated only on the principal of $1000. Contrast this with compound interest.

Compound Interest
Interest earned on the principal plus interest that was accrued earlier.
Using the above example, your $1000 would receive the same $100 interest the first year, but the second year you would receive $110 in interest instead of the $100. Why? Because of compounding, you are now receiving interest on the accrued interest earned. $1100 x 10% = $110. The extra $10 is the compound interest. In the third year you would receive $121 in interest. This is letting your money work for you, instead of you working for your money.
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