Posted by gary on February 02, 2001 at 19:52:48:
First, don’t practice fraud in this business. You have to sign docs at closing stating you will be occupying the property and if the lender finds out you are not there, they could call the loan. I always look at the rate of return as if I put cash into the deal out of my pocket. In your case, that is $9500. You say the cash flow is about $300 a month (not deducting cost of borrowing the 9.5k). Even if we throw another $100 a month into an expense account for future repairs, that is $2400 a year on a $9.5k investment or about 24% return on investment. I don’t know of any banks that will give you that return on your CD or any stock that would give me that return with such a low risk. You have a deal here no doubt, if your other expenses are accurate. The cost of borrowing the $9.5k is $960 a year. So, you net $1440 a year on a 9.5k investment. Still about a 15% return. Remember, the $960 interest to borrow the 9.5k is also tax deductible. I would go with the deal as non-owner occupied but try to get a 30 yr. fixed mortgage. With your credit score you can do easily. I do the same with Greenpoint Mortgage, they are on the web. My most recent 90%LTV investor loan was less than 8%, fixed for 30 years. Do you have other access to $10k, like borrowing from a 401k or a friend/relative? Do the deal, then find the best source of the $10k, using your line of credit as a last resort if you have to. Strike on this and don’t get into analysis paralysis.