The general answer is that it depends. It depends on the combination of many factors. A note investor has many concerns, two of which are he wants to make you a "Fair and Reasonable Offer" in order to purchase your Future Income Stream on one hand --- and on the other hand, he wants to be sure that he is making a Sound Investment where the "RISK" is being measured and compensated for. Usually he makes his offers based on the below Ten Principles.
* TYPE OF ASSET INVOLVED. The type of asset securing the Note is important when evaluating RISK. Is the Note secured by a government agency, real estate or another type of asset? Is there enough collateral involved to offset the financial commitment if the loan is not paid?
* MARKET CONDITIONS. How stable is the present and future resale market? Are we in and up-market or down-market? What will the collateral be worth in the future? How stable is the area? Is the market growing, flat or on a downturn?
* CREDIT OF BORROWER. How stable is the borrower? Does he have a decent job, savings, good credit rating? Has there ever been late payments made? Does he take pride in his purchase by taking care of the property?
* MONEY INVESTED. How much had the borrower put down on the property? The more money the borrower has invested in the property, the better the chance of him not walking away and forcing a Foreclosure.
* AVAILABILITY OF FUNDS. When capital is limited for note purchasing, Note buyers will oftentimes " cherry pick' their investments. They may purchase properties of only extraordinary safety.
* PROPERTY EQUITY. What is the loan to value ratio on the property? The more equity there is, the less RISK involved on a property. Is the property also secured by other assets ?
* INTEREST ON NOTE. What is the interest on the Note? The higher the interest rate the less an investor needs to discount to make the purchase feasible.
* TERMS OF THE NOTE. How long is the Note for? Normally the shorter the term of the Note, the less RISK to the investor. Less RISK means less discount needed.
* COMPETITION. How many Note buyers are competing for Notes at any given time. When Investors are forced to compete with other Investors, they are more apt to take greater RISKS.
* ECONOMIC CONDITIONS. Normally Investors will Place there Capital where they can receive the most return on their money with the least amount of RISK. As conditions change, so does their investments.
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