Posted by Paul Drummond on August 06, 2002 at 09:04:05:
In Reply to: How to Calculate the equity in the note? posted by KyleC on August 05, 2002 at 18:42:40:
Kyle:
1. If you are talking about your equity in a note that you have purchased, that equity is equal to the current principal balance due less your basis. For example, you purchase a note with a current principal balance of $25,000 at a cost of $20,000. $25,000 - $20,000 = $5,000. Your equity in this note is $5,000.
2. If you are talking about the note payor's equity in the real estate which secures the note you are evaluating to purchase, that equity is equal to the current market value of the real estate less all liens against it. For example, the $25,000 note that you purchased is the only lien against the real estate securing your note and the current market value of the real estate is $35,000. $35,000 - $25,000 = $10,000. The note payor's equity in the real estate is $10,000 (If you wish to represent the note payor's equity in percentage terms, then $10,000 divided by $35,000 equals 29%.).
To your success,
Paul
- Re: Two Examples KyleC 13:33:29 8/06/2002 (1)
- It's Basically the Same Paul Drummond 08:29:37 8/07/2002 (0)