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## Selling Notes for Improved Returns

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**THE SCENARIO**
If you own a note, it might be possible to sell it rather than continue collecting payments, and get an even better return than you otherwise would have.
For example, let's say that I buy a fully-amortizing note for $79,000 with an unpaid balance of $100,000, a payment of $898.83, and remaining term of 15 years. I collect payments for 3 years, then sell the note to Brenda, who wants to make 8% on her money.
**The question:** What is my overall return on my $79,000 initial investment?

**THE SOLUTION**
This one has a couple of parts.
**Step 1: Find out what Brenda will pay for the last 12 years**
N: 144 (Brenda's buying 12 years, or 12 x 12 = 144 payments)
I/YR: 8 (Brenda wants to get an 8% return on her money)
PV: (This is what I'm trying to find)
PMT: 898.83 (Brenda will receive the $898.83 monthly note payment each month)
FV: 0 (The note amortizes fully)
**Step 2: Find out what my ROI was for the 3 years I owned the note**
N: 36 (I owned the note for 3 years, which is 3 x 12 = 36 months)
I/YR: (This is what I'm trying to find)
PV: -79,000 (I paid $79,000 for the note originally)
PMT: 898.83 (For the 3 years I owned the note, I received payments of $898.83)
FV: 83,036.43 (This is the amount Brenda pays me for the note, determined in Part 1)

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- Find out how much Brenda is willing to pay for the last 12 years of the note.
- Find out my return on my investment over the 3 years I owned the note

Brenda will pay **$83,036.43** for the note.

My return on my $79,000 is **15.01%**.

Can you think of any reason not to sell the last 12 years of note payments to Brenda? Do you think I'm taking advantage of her by selling it to her for more than I'd be willing to buy it for? Why or why not? Let us know in the comments!