loan application - Posted by Mike

Posted by Soapymac on December 15, 1998 at 18:07:59:

I’m going to walk you through the steps as if you were one of my investor clients:

Sale:-----------> $156,000

15% down-------->($ 23,400)

= Loan Amt. of–> $132,600

30 yr., 8.9% = $ 1,057.40 PI X 12 = $12,688.80 Annual Mortgage

Your post does not mention any expenses…and here is where you must supply the rest.

Now,because you do not list the expenses, I’m going to do this in REVERSE:

Annual Gross Rents----------> $ 28,140.00 ($2,345 X 12)

Annual Mortgage Payment----->($ 12,688.80) ($1,057.40 X 12)

Amt. Remaining + Cash Flow–> $ 15,451.20

The $15,451.20 figure must cover the following:

Taxes, maintenance (pay yourself for unplugging the toilets), repairs, vacancy (minimum of 5% of total gross), advertising costs, utility responsibilities that you as a LANDLORD must pay (water, sewer), and insurance on the building.

I may have left some local items out (each area of the country is different, but you get the idea.) That being said, IF (big word) you can pay all those and still have enough cash left over such that you consider the property worth buying, then start negotiating for a lower purchase price.

As always, I will leave myself open to correction by the other members of this board.



loan application - Posted by Mike

Posted by Mike on December 15, 1998 at 12:38:23:

This site has been a big help in getting me and my wife excited about real estate.

We are currently interested in a three family with good cash flow. We have contacted some lenders and have received their loan applications. We are also planning to form a C Corp. for all our real estate transactions.

My question at this time is how do we complete the loan application. The information required is all personal (salary history, etc.) and not C Corp. related. Do we apply for the loan as individuals and later move the payments into the corporation, or what? This may seem like a stupid question but I’m confused.

Thanks in advance for any help.

Re: loan application - Posted by Bud Branstetter

Posted by Bud Branstetter on December 15, 1998 at 13:15:02:

Before I get my licks in I will comment on the loan app. Yes, they will want you personally sign for the loan as such they will want all the information on you. You can later move the payments to the corporation if you so desire for bookkeeping.

I want to discourage you from going out putting ten or twenty percent down and getting a new loan because of the cash flow. If this property has good cash flow after you deduct 30 or 40% of the gross for management, maintenance and vacancies then it will likely have equity also. You make your profit going in. Managing and maintaining it yourself will save you money but it becomes a JOB and is a false profit. You can learn how to buy to turn around and sell for a profit first. Learn all the other ways to make money without using your cash. Save the loans and down payments for when you can get a steal. Post the details and see what the others have to say about how good it is.

Re: loan application - Posted by mike

Posted by mike on December 15, 1998 at 13:41:06:


Thanksfor youe insight.

Here’s the deal:

House is located in a northern suburb of NYC and is listed for 179,900. We have been playing around with bids and will go as high as 156,600. House has been on the market for 18 months and has had one deal fall through. It is not on bad shape, new roof and siding.

The total income from the three apartments is $2,345. They pay gas and electric. I do plan on managing the property since I live close by (15 minutes).

We have a lender in mind (no committment) that has
suggested a loan of 15% down at 8.9%. I know its not a very creative deal, but I like the cash flow.

That’s it. Again thanks for comments and suggestions.