Posted by tom on October 02, 2003 at 09:19:28:
loans: full floating, interest rate changes with the index each month. 1/1 Arm changes yearly, 3/1 first change period 3 yrs then yearly…
you can get any of these NOO with payments of interest only. this frees up cash flow to reinvest in your properties or other business.
a bank will look at your property this way…
income 15600 (yr)
discount 25% (for vacancy and expenses…you can probably do a little better with experience)
NOI = 11700
if it is worth 155k
Cap = 7.6%
if you mortgage @ 80% LTV @ 5% interest only (5/1 @ current rates)
PMT = 6200
DSC = 1.9
cash flow = 5500
Equity = 31k
ROE = 17.7%
There will also be some tax shelter, depending on your situation.
this looks like a very good deal. i bet with doing your own rehab, you would not have that much into the deal so ROI (an unknown number) is going to be higher, and is potentially infinite. renting will also keep you hungry for doing another deal, and that is good motivation. flipping, the taxes are hell, and you have to pay. hold for at least a yr and taxes are much much less. you will make money on the hold as well, making it less desirable to sell.
Also, you could structure the deal to do the cosmetics first, get it rented (no holding costs), and finish up the furnace at a later time. i like what is happening in your area.