The $35 flat fee is pretty much the floor for licensed residential loan servicers in the U.S. right now. A few shops price at $25 to $30, and some will negotiate on volume, but the cost structure that drives the minimum, compliance, remittance, year-end tax reporting, and state licensing, does not scale down much below $25 per loan per month for a single note. Confirm current pricing in writing with any servicer you're considering, because fee schedules shift.
The assumption doing the most work in your model is treating servicer cost as the only fixed drag. At $63k face and 87 cents, you're in at roughly $54,800. If the note is at, say, 6.5% with 20 years remaining, your monthly PI is around $472, not $510, so the math is tighter than your headline number. The $35 fee is also not the only recurring line: servicer setup fees, annual fees in some states, and any forced-place insurance coordination cost pile onto that fixed base. The small note does not give you room to absorb any of them.
The risk you did not raise is concentration. A single note under $80k at this margin leaves you with almost no buffer if the note goes 60 days late. The servicer's fee does not stop; your income does. Recovery costs on a defaulted note at this balance can easily exceed any yield advantage from the discount.
The floor you're looking for is not purely a servicer fee threshold. It's the minimum balance at which your all-in fixed costs represent a tolerable share of gross cash flow at a realistic yield. For most single-note investors using a licensed servicer, that tends to settle somewhere between $80k and $100k face, which tracks your own observation.
What yield spread over the stated rate are you modeling at 87 cents, and does that change if you push the purchase price down to 82 or 83 cents to compensate for the fixed cost drag?
