Posted by William Earl on October 13, 2002 at 19:03:38:
Laura,
It sounds like your thinking too hard on a “conventional wavelength.” Yes, you probably can do what you are saying, but remember farms have big cashflow issues. Is there a possibility of owner financing? Are there other things such equipment that you could sell to a leasing company and lease back so you have a “taw” to play with? Are you from a warm area such as Fresno, California where the growing season is longer? What is your product on the farm? 18% sounds pretty high, but if the terms are right then it works out.
William Earl
Need Help with Calculating - Posted by Laura Brewer
Posted by Laura Brewer on October 13, 2002 at 11:20:26:
I am a newbie, and am trying to purchase some commercial property for 900K. I am not sure if I am figuring these figures in the correct manner. Please help me if I am not, or at least tell me if I am right. If I were to borrow 900K at18% (figure off the top of my head), this would mean I would really be borrowing one million sixty two thousand dollars, RIGHT??? 162000. hmmmm. If I divide this by 10 years (to pay off note) this means the amount paid yearly is sixteen thousand twenty dollars 16200. right??? Meaning that every 3 months (this is how the bussiness is paid, every 3 months) Three thousand two hundred and forty dollars, 3240. Right??? Meaning monthly payments are Thirteen hundred and fifty dollars, 1350. Right??? The income for the Farm was 154K last year.Somehow I do not understand what I am doing, because this does not seem like much. This means my profit is outstanding??? I am learning, please bear with me. I am not even sure I can borrow this amount since my scores are low, and credit is bad, BUT, I don’t know if I can do this untill I try. I know I can run the Bussiness, for I am doing the same thing right now “FOR” a company and will be here 12 years on Nov.1 I want to own my own. Too many people are telling me it can’t be done with no credit and no money. I am trying to prove them wrong. I want to do this so bad, and get out of the lifestyle I have been in for 21 years, and only because I believed in my heart that I could not do anything about it. I am 41 now, and I am trying to do something about it. I need help figuring figures, so that I can show the lenders where I apply that I can do this. I need to LEARN, not just have someone tell me the answeres. Thank you for helping me.
Laura,
Your numbers are not right. Go back and redo your calculations.
With a 900K loan at 18% anually, you are looking at yearly mortgage payments of about $194,600, which is about $16,217 per month.
Without sounding condescending, your calculation tells me that you need to really educate yourself about the mathematics of amortization. You can use an amortization calculator that is readily available on many financial websites, but I think you’d do yourself a huge favour if you had some intuition of what numbers will make sense. This will at least save you financially when someone tries to sell you a “deal” that is a loser.
Hmmmm, there is so much I do not know. I do know, that I better find a lender tht the interest rates are NOT 18% lol. I did not realize this was annually. How can any property get paid off if the interest in annually??? Thank you for the help, for all who have replied
Laura
I Think you’re overlooking that interest is calculated annually - that is 18% per year.
Therefore:
$154,000 - income from farm
-$162,000 - interest on note
= -8,000 - negative cash flow
Re: Need Help with Calculating - Posted by John GA
Posted by John GA on October 13, 2002 at 21:32:39:
Something’s not right. I’m new also but it seems to me that with 18% you’re going to pay alot more than $162,000. I don’t think your figures are amortized over ten yrs. I might be wrong though!