If you've looked at our note portfolio, you've seen these crazy Return-on-Investment (ROI) ranges. But what do they mean and why in the world would you settle for 19% if you could get 125%? It depends on what you want: quick cash or longterm cashflow. There are at least 5 exit strategies with different ROIs that everyone contemplates on a distressed note. I'll describe each one in a separate blog post.
Here's #1 - You have a mortgage your borrower has stopped paying on and you simply get them to "reinstate" and start paying again. Here are sample numbers that show how this is done.
$15,000 What we paid for the note
3,500 Our expenses to get them paying again
$18,500 Our total expense
$1,400 Reinstatement fee - Charged as "skin-in-the-game" to make sure they mean to pay again
2,100 6 months of $350 mortgage payments in the first year (a conservative estimate)
$3,500 Our total income
ROI = $3500/$18,500
ROI = 19%
That's where our 19% projection comes from. Up next, how we COULD get 125%!