How are my profit, monthly cash flow, & the price of a Mortgage Note determined?
It’s a combination of 3 variables: 1) The Local Market Rent 2) The Note Value 3) The Amortization Period The local market rent determines the monthly cash flow, how much you can charge (e.g. $300). The potential occupant, like you and I, buys based on the monthly payment they can afford and agreed to. The Note is usually done at 10% interest and amortized over 30 years. So for this example, a payment of $300, at 10%, amortized over 30 years, will mean an initial Note Face Value of approximately $35,000. So they may sign an agreement with you for $35,000 at $300/month for 30 years @ 10% interest, since the amount they pay is equal to or less than rent. You then collect the $300 mortgage payments and hold the note similar to a bank.
