advice please - Posted by Talha Shamim

Posted by Nate(DC) on June 29, 2001 at 15:09:23:

This is a marginal deal at best. I would not do it. Here is why:

Gross rents 12600
Less vacancy (5%) -630
EGI 11970
Less maintenance, repair, management (20%) -2394
Less Taxes & insurance -1950
NOI 7626

Your payment on the first trust is $595 per month for principal and interest, plus $34/mo for PMI for a total of $629 per month or $7,548 per year.

Your payment on the second trust will be $45/mo or $534 per year and you will have $8,900 due in one year.

So your total in-flow is $7,626 per year and your total out-flow is ($7,548 + $534) or $8,082 per year. So you will have a negative cash flow of $450 per year AND you will have to come up with the $8900 out of pocket ANYWAY in a year, since the property isn’t generating any case to pay it off.

I don’t see why you would bother with this deal.


advice please - Posted by Talha Shamim

Posted by Talha Shamim on June 27, 2001 at 20:29:43:

I am new at REI. Presently working on getting a duplex for $89000.

Through a local lender I may get 90% financing at 8.25% for 30 years, 0 points, and approximately $1200 in other closing costs.

Is this loan good, or should I be looking for a lower interest rate?

Thanks for any help

Talha Shamim

Re: advice please - Posted by Nate(DC)

Posted by Nate(DC) on June 28, 2001 at 17:47:00:


You don’t tell us two crucial things to be able to answer that question:

  1. How is your credit?

  2. Is the property going to be owner-occupied? (i.e. will you live in one unit and rent out the other, or will both units be rented out?)

Depending on the answer to these questions, my answer to your question would vary. If you will owner-occupy and have perfect credit, you could very likely do better. If you are not going to live in one unit and/or your credit is less than stellar, the rate quoted is probably not bad. But post more details so I (and others here) can make an informed judgement.


Re: advice please - Posted by Talha Shamim

Posted by Talha Shamim on June 28, 2001 at 21:26:43:

Hello Nate,

Thanks for your reply. I thought I was not going to get one.

I am not going to live in any of these units. They will both be rented. My credit is not perfect, but it is reasonably good. I was just trying to find the FICO score on the report I just recently got from one of the banks but I could not find it anywhere. Anyway, I do know that its reasonable, and that I have never had trouble before.

Could you also look at these numbers for me and tell me what you think.
I have agreed on a price of $89000 for the duplex. Total rent that I will recieve is $1050/month. Property tax I believe will be around $1600 and insurance of about $350. This lender has agreed to finance 90% of the price @ 8.125% and there will be a PMI of $34/month. I can come up with the remaining 10% of the price, but I have found an investor friend who is willing to provide this remaining amount @ 6% interest, with only the interest payable each month and the full amount due in one year. The only other closing expenses include the appraisal fee , recording fee etc. a total of about $1200.

What do you think of this deal.