The 360-Day Year. Yeah, really.

The 360-day year was created by the banks, and, surprisingly, it’s actually a good idea.

The first time I came across it, I was baffled, but then I figured it out.

It has to do with Real Estate Finance, and you need to know about this, because you don’t read or hear much about it.

Did you know that Bankers use a different year from the rest of us?

Well, actually we use it too, when we deal with banks, because we don’t have a choice.

But it’s not actually a year.

And it is something that you need to know about in order to avoid surprises.

THE 360-DAY YEAR

The 360-day year is strange, but in an odd way, it’s also necessary.

There are actually 365 days in the year.

Yes, I realize that you already know that.

But did you know that it takes the Earth 365 and 1/4 days to complete its orbit around the sun, not 365 days?

it’s called the Solar Year.

So, because of that, every four years, we have to add one day to our year, making 366 days, in order to synchronize the Calendar Year with the Solar Year.

But, where do we put that extra day?

We stick that extra day at the end of February, giving it 29 days instead of 28, and we call the year “Leap Year.”

Of course, the rest of our months have either 30 days or 31 days.

Can’t remember which ones are which?

Remember the children’s rhyme that they used in school.

“30 days has September, April, June, and November;

All the rest have 31, except February, which has 28;

Except in Leap Year, when it has 29.”

OK, so what does this have to do with Real Estate Finance?

THE 360-DAY BANKER’S YEAR

The 365/366-day year has always caused real problems for the Banking Industry, before computers.

If a loan document said “half a year” or semi-annually, what did it mean?

Well, it depended on where you were in the year at the time, and whether it was a 365-day year or a 366-day year.

The same problems occurs with the term “quarterly.”

So Bankers just ignored all of the facts for their own personal interests, as they ignore many other things for their own personal interests.

The Bankers decided that their year would have 12 months, and that each month would have 30 days, making a total of 360 days in the year.

Quarterly meant every three months, or every 90 days.

Semi-annually meant every six months, or every 180 days.

So, to be fair to the Bankers, it just works better this way in the real world of finance, when all of the months are the same, and all of the years are 360 days.

Even if we have to pretend that it is that way.

CONCLUSION

So, don’t make the mistake of doing your own calculations on an investment when you are figuring your interest payments, or annual amounts, or anything else, until you find out if the Lender will be using a real year, or using a Banker’s Year.

It could cause you to have to do everything over again.

Don’t let the 360-day year trip you up.

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RESOURCES

I touch on this same concept in more than one of my books, but the one with the most detailed information is “Do This, Not That!”  If you would like to preview it, you can go here on this website to look at it first, use the 3D Flip Reader to look at the Contents and read the first few chapters.

The paperback is available on my Amazon Author Page, along with my other books.

And I have related Articles about real estate investing and other real estate matters from other perspectives on my LinkedIn Page.

I am also active on Quora.com where I have answered over 300 questions, and they have almost 3 Million views.

If you happen to be doing, or if you are considering doing, a Section 1031 Like Kind Exchange, then you should start with a Dictionary, and I have done one, in 3 separate Blog Posts here: Part 1, Part 2, and Part 3.  And I have a lot of material for you to consider on my S1031 Exchange website.

You should always check out the credentials of anyone, like myself, who you are relying on for accurate information by looking closely at their Biography.  Here’s mine.

And if you think you might like to read one of my books, but can’t decide which one, here are four that I recommend.

the 360-day year

DISCLAIMER

I am an Attorney licensed to practice in Texas, North Carolina, Virginia, and the District of Columbia.  But I am not your Attorney.  I would be honored if I were, but I am not.  Reading this Blog does not created an attorney-client relationship between us.  Internet content should not be used as a substitute for the advice of a competent Attorney admitted or authorized to practice law in your state or jurisdiction.

September 14, 2022

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