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The Pros And Cons Of Using A Note Calculator

GDNI 61 | Using Note Calculator


Some prefer using note calculators, while others don’t for a variety of reasons. In this episode, Gail Greenberg and Chris Seveney talk about note calculators and when it is ideal and not ideal to use them. As they touch on its functions when it comes to confirming bids, getting that discount on performing notes, and more, they also lay down the kinds of risks involved when reaching for a note calculator. In this episode, discover the one for you as they dish out their recommended apps for your phone.

Listen to the podcast here:

The Pros And Cons Of Using A Note Calculator

I’m picturing you in a lab full of bubbling beakers with weird-looking substances in the middle smoking in all different colors because that’s you. You’re the mad genius. Tell us what you’re doing, Chris. You’re sitting in a mild-mannered office looking very normal.

I’m sitting up on my desk waving my feet, looking out my window.

Chris, what just happened?

We built my primary residence and when we were building it, we were going through the power company too because we needed the upgrade on the power compared to what was in the property and going to run underground. They came back and were like, “We’re going to have to put a brand new transformer up on the pole across the street to provide added juice to your house and some of the other houses in the neighborhood,” and stuff and so forth. I was sitting there thinking, “Who is paying for this added transformer? This transformer is probably going to cost $25,000 to $30,000.”

Did the cost spread among on all the utility customers just so you can have an extra shot of juice?

They’re like, “We’ll cover it. We’ll pay for it.” I’m like, “Okay.” What’s interesting is every time we have some severe storms, it blows up or it definitely overloads. It’s sparking and everything. What happened was a neighbor’s tree fell on one of the lines and took it down, which they got it fixed throughout the night probably because the road I live on is technically considered a state road. In the wintertime, there are three plows just driving back and forth up the road. There’s never any snow in my street, which is nice. I digressed. In the note world of things, my focus is on these properties I’ve got taken back. I’ve got three of them that are right in the throes that are sucking up most of my time. I’ve got one in Pennsylvania taken back, trying to figure out what to do, and two in North Carolina that I have and then one in the wonderful place of Fort Wayne, Indiana, which if anyone invests in Fort Wayne, God bless you. If you don’t, then don’t. That’s pretty much what I’ve got wrapping up a lot of my time.

I hate to poop on Fort Wayne. We both agree that we love Indiana. What do you think it is about Fort Wayne particularly that makes it the suck hole of all dreams for note investors and real estate people?

The city, I think they target out of state investors to find ways to target them with liens and fines. I’ve got a property that’s not horrible, but seriously they’re trying to stick some fines on the property for a broken light on the house. There are five houses down, the guy’s got abandoned vehicles and it looks like a trash yard. It’s like what that person’s occupied and living there. This house right now is vacant, trying to get it renovated, which my contractor bailed on me for. It’s been challenging. I know someone else who I spoke with and is having some major issues in Fort Wayne as well.

Just to recap too, before your contractor bailed on you, didn’t another contractor or someone, we’re not sure, who steals the appliances out of this house?

The appliance is in the copper.

The appliance is in the copper. Click To Tweet

Eventually maybe they’ll steal the whole house and you’ll just have a nice lot you can sell to someone.

If a tornado could touch down somewhere, that would be at a place to have one touchdown.

A great service would be someone who’s like Torches R’ Us where you wouldn’t hire someone to burn down your house, but they would agree to listen to you talking or to read your social media posts and to know when you want a house burned down. It wouldn’t be criminal because you didn’t ask them to do it, but they would figure out that you wanted it done.

It’s still criminal burning down someone’s house.

For them, but not for you. If you could find someone with a record of mental imbalance and hold them responsible.

If there are any volunteers out there who want to go burn properties down, please contact Gail and stay as far away from me as possible.

We’d love to find people with firebug issues and just leak addresses to them. It’s a little like, I don’t know if you ever saw that show, Dexter. Dexter was someone who had homicidal tendencies. He couldn’t help himself. His father, who was a policeman, wanted to keep him safe. He channeled him in productive ways and taught him only to kill really bad, horrible people. Dexter got to be who he was and the horrible people went away and did not hurt anyone else. I see this as being a similar situation.

Let’s get onto a topic that our audience hopefully will follow us with doing versus talking about burning down places. We wanted to talk about, do you need a calculator? It’s interesting because I’m very curious for your opinion and you’re probably going to be somewhat surprised about my opinion as well in regard to this. We wanted to talk about it and at the end of this show, we will be giving away another little free gimme that we try and appease to our readers and those who follow us and try and assist them in their note journey. Gail, I’ll let you start the conversation about note calculators. Do you have one? Do you use one and your opinions?

I think this is the funniest topic because every new investor that I talk to, and even some more experienced investors, it’s like having a great chili recipe. People are always working on their calculators. Everyone is convinced that they’ve got a secret sauce with their calculators. They’ve got some special wrinkle that makes them so much more valuable or so much more realistic than other people’s. I too, at the beginning, did a spreadsheet. I’m not really a number person, so I don’t think that mine was particularly clever. I took a spreadsheet and I just divided it into four chunks. One was the loan reinstates. The next one was the loan doesn’t reinstate but you sell. I don’t even remember it but there were four quadrants. It seemed to make sense at the time. You take back the property. You get the property back with a low Cash for Keys offer and then you rehab it and rent it or resell it.

The other one was you have to pay for a full forfeiture foreclosure. How does that look? For me, it got more and more confusing because there are so many unknowns. If you knew for sure that you’re going to buy a nonperforming note within the ideal four months with minimal intervention, you’re going to get somebody to not only start paying again, but to give you $1,500 upfront. That is the standard when you’re talking about a CFD that’s up to a year behind. To me, it gets confusing. After that clear, simple scenario, any scenario that involves you take back the property through whatever means, and we both know there are very inexpensive taking back of properties and then there are super expensive taking back of properties. Assuming you get it back, the whole thing after that is based on something that we never know, which is how much rehab is that place going to need to be able to exit that in some other way other than burning it down?

GDNI 61 | Using Note Calculator
Using Note Calculator: When you buy notes and contracts for deed, it’s not about what you should pay. It’s about what the seller expects.


I probably spent 100 hours building my calculator. Similar to yours, if it’s performing, if it’s reperforming, if it’s a loan mod, rolling in the past due, I’ve got short sale, I’ve got for foreclosure, take it back, rehab and flip. I’ve got foreclosure, take it back, rehab and rent it. I’ve got Cash for Keys, I’ve got Cash for Keys fix and flip, Cash for Keys sell as-is, Cash for Keys fix and rent. I’ve got every possible scenario.

How many possible combinations are there? There’s a lot.

Here’s the interesting thing with any calculator. It’s garbage in, garbage out in the sense that the calculator depends on how you use it, but the moment you plug a number, it’s wrong. That’s where I think a lot of people sometimes get a little caught up too much in the calculator because it’s not like a savings bond or something where you’ve got a guaranteed number of payments coming through and you can calculate it and then take another investment to calculate one versus the other. Everything involved with note investing is you’re looking at a range. The range is about what you should pay for that asset within a range, assuming you’re going to have these many expenses. It’s not about putting it being a guru and making calculator. It’s understanding what can go wrong and what your risk is. I showed somebody on a performing note at one point in time that you could have anywhere from a 6% to a 22% return. They’re like, “How was that?” I’m like, “It depends on how long you hold the asset for.” Even just the length of time that you hold something has a huge impact on your returns. I’m not going to take this to dive into all the intricacies of it. We should be more talking broad-based terms of do you need a calculator and if you do, what should it be used for?

Honestly, I haven’t used a calculator in a few years. I don’t find it that useful. When you talk about trying to use a calculator to tell you what you should bid on something based on these different scenarios and stuff. It doesn’t matter because when you buy notes and contracts for deed, it’s not about what you should pay. It’s about what the seller expects and in a competitive environment what other investors are willing to offer for things. We all shake our heads. Everyone I know blames new people, “New people have always been too much. They’re ruining it for everybody.” When you and I put out tapes and we have new people, they don’t fit too much.

It’s more not as much about the calculator in regard to bidding. I think it’s everyone wants the perfect asset of, “I want to get 20% with no risk on this location with this many people with a house that’s completely been updated.” The reality is that is not happening. That’s a whole other topic.

I have a little bit of money parked at Discover Bank, which is a virtual bricks and mortar bank. They sent me an exciting flyer. They were bursting with enthusiasm about this. They offered if I bought a CD from them $25,000 for five years, they would deliver to me a grand total of $3,771 in interest. It was like, “Champagnes are popping.” We get into this mindset of wanting so much such a high return, so many assurances of that it’s going to be there, low risk and high reward. Low risk and high reward do not go hand in hand. We can agree that they are frenemies. They are not a couple. They do not go together.

You mentioned the CDs and stuff. I saw a fund come out where you can put your money in for 90 days and it has 4% per annum. I’m looking at that and I’m like, “That’s 4% but the money’s still at risk. Whereas I could go put something in a CD or in a treasury at 2% to 2.5%. For the 2%, would I take that risk?” Probably not, honestly. You haven’t used your calculator in years. It’s interesting because I will still use mine to confirm bids, but I’m not super robust at taking every bid. Once you start bidding on a lot of assets at a certain price point and a location, you know what they’re worth. You know that if you’re bidding on a $40,000 CFD in Indiana that hasn’t paid in a year and so forth, you’re going to pay probably somewhere between $15,000 and $22,000 for that rough numbers. If there have been payments, it could be somewhere in the high to mid-twenties but it’s got to be somewhere in that range and it’s going to vary depending on certain aspects.

You can go back and plug that in your calculator. I can manipulate a calculator to tell me almost anything I want it to, but I look at trying to target a return and how much risk is involved in that return. For example, if I’m targeting 30%, is it 30% on only spending $1,000 in legal or is it 30% putting aside $5,000 in legal? If it’s 30% with $5,000 in legal, I feel pretty comfortable. If it’s 30% with only $1,000 in legal, I’m not feeling too comfortable on that to be honest with you. The calculator can be great, but it’s about giving you a ballpark idea of where you should potentially be or a range. I do have a question for you, Gail, which is you’ve closed out deals in the past. Have you ever gone back and technically calculated the true yield that your investor got on that asset?

When I do close one out, I do give them a recap of what they had in it because memories fade. What they had in it, what we got in terms of profit and how long a period it was. I give them an overall return on how it went.

For most people on a calculator, they may look at calculating yield, which is also considered IRR or Internal Rate of Return, which is really the interest rate you’re paying yourself. It varies based on how much you invested, when you invested it and when your payments, that cash stream, comes into play. I know a lot of people out there talk about yield and my question is how many have gone back and then plugged in, “You funded $20,000 on this date and you’ve got payments of $2,000 on these five dates and a $22,000 payment on this date. Based on that, your IRR or your yield was X?” I’ve done that before, I’m not sure if anybody else does, and the investor was like, “That’s great. I made $8,000.” When they’re more concerned, they’re more looking at it. It was Joel Markovitz who mentioned this at one point in time. He was like, “People want to know how much they made, the $8,000 that puts food on the table. It’s not, ‘I made a 15% IRR.’ That’s great, but people want to know, ‘How much cash can I add to my net worth?”’

Everyone wants the perfect asset. The reality of it is that isn’t happening. Click To Tweet

First of all, I hope people are not investing with the money they need to put the food on the table. We’re talking about fattening up IRAs, for the most part here. That’s future food on the table when you’re a retiree. I list everything that came in. I’ll be like, “This is what we got as an upfront payment. When they reinstated, this is what we got total in cashflow. This is the amount of money that’s profit above and beyond the money that I’m paying you back. That is your original investment money. Here’s the total of what you got, $11,000.” I tell them, “Congratulations. That was a 60% return on your $25 or $30,” whatever it was. That is a very valuable exercise. Going back as investors, what role can a calculator play in our world? For me, it was rehearsing different scenarios that might happen and asking myself internally, “Am I going to be okay if this thing goes this way versus my ideal of how it’s going to go?” From that standpoint, it can be an emboldening and confidence-building tool. A lot of people receive tapes. They may even analyze tapes, but many people stop there and they don’t make bids and they don’t buy notes and CFDs. That’s a critical place where a calculator can maybe give you that confidence to say like, “Even if everything goes horribly wrong, if I can buy it for this, I can still be okay.”

Where I think the calculator is the most beneficial is evaluating multiple assets in the sense of, “When I bid, I’ll bid on ten assets and then you all bid. I’ll get counters back and so forth.” I’ll look at, “This one fits my criteria. I’d take the risk on this one. This one, what they’re asking for it, no. It’s just too high of a risk based on the scenarios,” and the calculator can assist with that. A calculator is almost more important on performing notes than nonperforming notes. I say that because on the nonperforming side, there are so many variables that can go wrong in that sense. Wherein on a performing note, you’re analyzing and comparing other performing assets and things are typically a little more stable, especially if there’s a long pay history. You’re analyzing possibly two assets that are more stabilized or should be more stabilized than multiple non-performers that anything and everything can go wrong on those. That’s where I think a calculator is. I almost think it’s more beneficial on the performing side than it is the nonperforming side.

On the performing side, what is it that you’re looking at other than just it keeps performing and this is the yield?

I will look at several things. I’ll look at, what is the interest rate on it? If it’s a low-interest rate, more than likely the person may not refinance. Where if it’s higher, they may potentially refinance or you can try and assist them, which gets you exited faster, which can bump up your yield. If it’s a lower interest rate, you might be able to because you’re picking up in a much heavier discount. That’s a better option to do a partial possibly on that, to sell some of those upfront payments, to pay for a lot of what you paid and then you get the back end. The other thing I look at on is I try and get that heavier discount on it and then run it through to see how long I may hold it for and what someone may be looking on the other end. I also do look at what state is it in because in case I have to take it back or foreclose. The monthly payment and the interest rate is key for me in the sense of what my next move is. I look at everything like playing chess. It’s like, “If I’m going to get this, if it’s a low-interest rate, I might look at doing a partial on it. If it’s 200 payments left, I might be able to sell 100 payments of that to pay it off. I get 100 on the backend. If it’s got a high-interest rate, my goal is to try and focus on, ‘Can I get somebody to refinance them and even pay the closing costs for them to refinance? I’m still getting it at a discount where it will bump up my yield and my return even higher.”’

As I understand this, you’re looking at a performing note as a currency in a way that can be used in different ways. You can sell a partial and recapture your investment money. There have been discussions in note groups on Facebook where people have talked about using performing notes as down payments on physical properties and as other kinds. You can almost think of them like gift cards or it’s a cashflow that you can sell.

Here’s the thing though. I’ve seen people post this online and people keep talking about it but nobody’s ever fit. It’s like Bigfoot in the sense of somebody’s saying that you can hypothecate the note with a bank. What that means is I own the first position note with a UPB of $30,000. I’m going to the bank and take out a loan for $20,000 on this note and they will give me the loan as the asset that backs it, so I can use that $20,000 elsewhere or whatever it is. Everyone talks about, “No, you can’t go to the big banks. You go to your local bank.” I see people posting who I think may not even have bought a note before. I’m like, “Can somebody share with me a case study and say the bank, who the person at the bank was and tell me who this was?” On a commercial side, that’s a different story. Someone says, “You can do it on commercial,” but I’m sitting there thinking, “We’re in the single-family residential owner-occupied market. I want somebody to prove to me that this has physically ever been done because I’m still Bigfoot theory on this thing of everyone says it’s out there but show me the proof.”

I agree because when I go to the bank and I’m just wiring money to buy something or whatever, I get these casual conversations with the bank officials and they’re like, “What real estate do you do?” When we tell them that we mop up their messes of all the bad loans that they’ve made, they are so shocked because they don’t even know that business exists. I don’t know what they think happens with the loans that they make that go bad. They end up in a big, giant dumpster somewhere and everyone just washes it all up. It’s fascinating. I picture myself trying to go in and talk to those same people to say like, “I’ve got this loan and these people owe me $30,000. Why don’t you give me a line of credit secured by this debt?” They’ll be like, “Sit down. Let’s write it up.”

I have a calculator that forecast for partials and things like that where things fade, and it’s a strategy that can work very well. I remember in one pool, essentially I acquired these assets, turned around and worked out some partials on them, which covered the costs for the partials. Each one gave me between 50 and 100 payments on the backend of $300 a month. When I added everything up, it was out $100,000 of money. I’m not going to see that for eight to ten years, and if they pay it off early then I don’t get as much, but I still get something that will be cashflow. I’m banking $1,000 of cashflow in the future that is accruing interest right now on it but I do not have to pay any taxes on it.

I return to the idea that if you are trying to use a calculator to figure out what you should bid on things, you can calculate away all day long, but ultimately there is something else that sets the price and that’s the market. If you have a seller who wants 60% of UPB on nonperforming notes, he’s probably not going to accept a 42% bid on the first go-round. If you see those assets continuing to linger, like anyone else, people do become more negotiable over time if they want to get rid of something. It’s a beautiful dream that we could come up with a number through our own calculations and then the seller would just be like, “I appreciate how you arrived at that number. I am going to sell it to you for that because I can see it works for you.”

One thing I’ll tell people in the bidding, “If you bid on ten assets and you get all ten accepted with no counters or anything like that, then you probably did make a mistake and overbid.”

GDNI 61 | Using Note Calculator
Using Note Calculator: If you bid on ten assets and you get all ten accepted with no counters, then you probably did make a mistake and overbid.


They’re excited. When people give me a high bid, I have to walk away and restrain myself from accepting immediately.

I’ve had one deal where it was somebody who I knew was newer who bid on an asset and they completely overbid on this thing. It was in my favorite state and I had told them upfront, “This is going to be a foreclosure. You need to do this and that.” They bid at the time close to $0.65 on the dollar. This was on a $35,000 asset. I looked at it and I went back to them and said, “Take another look at your number. You missed something.” They’re like, “What do you mean?” I’m like, “You’re overpaying for this,” flat out. I’ve had a broker do that in the past when I was starting out, that came back to me and said, “Take another look at this. Recheck your number.” I’ve been in the business, other businesses to know that means that you probably could have made a mistake or went a little bit too high on something. For me, I’m selling assets and I’m doing that to make a profit and your fiduciary responsibility if I have an investor on it. On the flip side, I also don’t want to bankrupt somebody else to make a few extra $2,000 or $3,000 and then have them come back at me. The other thing is to have them come back at me with a lawsuit saying, “I didn’t do something,” or “I didn’t say something.” It’s not worth that aggravation. I always try and get the most for assets. That was a one-off instance. Since then, I don’t think I’ve had run into that because people have gotten a little smarter on things.

There are always new people.

What I found too with newer people is they may ask, “What do you want for it?” versus trying to put a number out. I have no problem telling them, “Here’s what I’m looking for.”

It’s that or they indulge in a big guessing game about what people want. I ask upfront, “Is there any bidding guidance on this?” Often the seller will say, “We want 60%.”

Where I see most people overbidding is they’re using the calculator, but they’re using the stair-step calculator, which is, “I’m going to bid this much or this much.” It’s a $30,000 UPB, but the principal and interest payment is only $250 a month. They’re going to turn around and pay $20,000 for that note because it’s performing. I’m like, “You’re nuts. You’re going to net about $220 out of that thing.” Paying a huge number for that is going to be insane. I’ve seen people that had $100 a month UPB pay $18,000 for the asset. I’m sitting there thinking, “You’ve got to pay for $20 in servicing $80 a month, that’s $1,000 a year. It’s going to take eighteen years to get your money if that’s what you’re interested in.” That’s where I see mistakes.

Let’s save everyone a lot of trouble with calculators. If you’re buying a performing note, you want to get all your money back, all your investment back within three to four years. You’re looking for a 25% ROI or up to 30% ROI. They’re not easy to find. With a good solid performer, maybe you let it go to six years or something to get all your money back. Anything beyond that is insane.

It’s a rule of 72, so six years is 12%. You could maybe go to seven to eight years on some of them. If you’re looking for less return and stuff, that’s fine. If you’re happy with 6%, 8% you can go 8% to 10%, but once you’re at twelve to fourteen years, that’s another animal in my mind. It’s all different. I know people who have $1 billion sitting in the bank and they’re extremely happy on a 4% return because when you have $1 billion, 4% on a billion is a lot of money and they don’t need to take that risk. They just want to stay a little bit ahead of inflation and keep their money safe.

I would like to be introduced to these people with $1 billion. When are they coming over? Let’s have dinner. You can make them one of your famous briskets.

You’re supposed to shy away from red meat and stuff, but I’ll tell you that brisket, I had to sneak a few pieces and stuff and I looked at my wife and be like, “I can chew you right now.”

Low risk and high reward do not go hand in hand. Click To Tweet

They’ll be writing hymns to that brisket for many years to come. Do you have anything else to say on this subject?

I have something I’ll talk about in the Notes and Bolts section of this. It’s part of what we mentioned at the beginning of a little gift to thank you for the followers. We’ll be giving something away. Final thoughts, I believe you do need a calculator. It should be simplicity. This is the Bill McCafferty “Keep it simple, stupid.” I went way out of my way with my engineering background designing a calculator that completely overkill.

You’re the Michelangelo of calculators, so no one can fault you for going overboard.

I definitely agree, you should have a calculator. What you need to know at the end of the day, where do you think your overall expenses are going to be? What do you think your overall income is going to be? What’s the period of time it’s going to take? Bid on the asset knowing that you’ve got protection in there in case the property is not worth what you think it’s worth. Maybe discount it by 25% and make sure that you’ve definitely got covered legal expenses as part of that acquisition.

My whole approach, this is the reason why I don’t use the calculator too much anymore. I want to be all-in on a property, even including the legal costs potentially. You never want to spend more than half of what a property is worth. The less it’s worth, the more you should even back it down a little from half. That to me is having enough coverage. You’re buying an asset for half of what it’s worth. You should be able to make something out of it. The only calculator that I use, and I’m sure everybody knows this and does this anyway. There’s an app for your phone called EZ Calculators. If you put that on and use the TVM calculator, that is going to give you mostly what you need. I tend to use the calculator the most when I’m selling things. For me to calculate a yield to know what a decent price is for a buyer of a reperformer that I’ve got. Other than that, I don’t think I’m going to be calculating too much, Chris. I will just come to you for my more advanced calculations.

Instead of using that EZ Calculators, I will send everybody out who wants an Excel file, which is for performing notes. What it will feature is you can calculate not only the return based on an acquisition price that you’re going to acquire but also the management aspect of it of how long you anticipate on holding it. If you’re going to sell it, what are you going to sell it to an investor at what yields? Maybe you’re going to sell it to somebody at 10% or 12%. It will tell you from there. For an example, if you had a $32,000 UPB on a ten-year loan with ten years left paying $429, now you hold that for 24 months and want to sell it at a 12% yield. You paid $29,500 for it, you’re going to get about 11.4%. If you want to make 12% on it, you should have paid $29,000. Everything where you can put the number that you’re bidding, it will tell you your yield or there’s a pull-down menu that says, “I want to make 14% on this asset.” You click on a little button and go to 14% and it will then tell you, “Here is what you know you need to bid.” I went anywhere from 6% to 15% because if you can get it for less than 15% on a performing note, then God bless you.

Chris, you are the gift that keeps on giving. Thank you so much. Thank you to all our readers. Please be sure to sign up. Did you want to send people to a new page to sign up to get your calculator or what have you done?

There is a link for where you can go in to download this calculator.

If you haven’t already, after all our constant nagging, please sign up on our website at Take a first look at all our sexy tapes and more goodies that Chris cannot stop himself from creating all the time.

If you could take a few moments, leave us a review on iTunes or Stitcher, it would be greatly appreciated as well.

GDNI 61 | Using Note Calculator
Using Note Calculator: The less a property is worth, the more you should back it down a little from half.


More goodies could ensue.

The more reviews, the more goodies. I will open up the vaults. I always contemplate, “What if I just gave out my nonperforming calculator?” Part of me is somewhat scared because people would look at it and flip out in regard to there’s way too much information and way too many numbers on it. As people get started and stuff, it goes back to trying to keep things simple for people. I think starting out with a performing calculator and letting people play with it and understand some of the things. What’s interesting you’re going to find is, it depends on the interest rate of the loan. If it’s a lower rate, the longer you hold it, the less of a return you’re going to have in that asset as you hold it for a longer period of time because of the whole time value of money scenario calculation.

The real danger, Chris, is like the guy in A Beautiful Mind. People will realize when they look at your nonperforming calculator that you’re really crazy cool but pretty crazy. Who knows what will happen after that?

They’ll probably look at me and say, “This guy has got way too much free time on his hands.”

It’s funny because you have none at all. Thanks, everybody. Join us again next time.

Thank you. Have a good one.

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