Apartment and Rental Properties - Pre Approval Loan for Investing
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dkdk100
10-08-05, 08:21 AM
My loan is approved for investing purposes.
I live in San Francisco and I am going to buy investment property in either Tucson, Las Vegas or Laughlin, NV with my niece as my investment partner.
Here is the deal on the loan:
The loan is for $250,000
1st loan at 6.50% for $200,000 for 5 years - interest only
2nd loan at 9% for $50,000 for 5 years - interest only
this is for the 20% down payment
payments for the loans
1083.33 - lst loan
375.00 - 2nd loan
55.00 - approx. ins.
135.00 approx. property tax
1648.33 for total of everything
The reason why this loan is high is because it is stated income only.
We are not putting any of our money down for this property. We have money put away for about 2 yrs. payment if the property is not going to be rented.
The only thing out of pocket will be the closing cost of about $5,000.
The mortgage broker wanted to charge us so many fees and I made him take off the fees, so he will come back on Oct. 10 with a better closing cost for fees, hoping that it will be under $5,000.
The property management fee in Las Vegas and Laughlin is 10% of the rental. Tucson is free for the first year and then 10% thereafter - only if I buy from this realtor.
Is it better for us to put the 20% ourselves instead of borrowing at 9%? Is an interest only loan a better option to go compared to a conventional loan? The loan can be amortize with extra payment?
Investor A - salary per year $97,256
Investor B - salary per year $100,000 to $120,000 - self employed
Investor A already has a 2nd house in Laughlin, which is paid off.
Loan on SF house is 470,000 at 2752.00 a month. House in SF is $850,000 appraised value as of 6-1-05.
Investor B has a house in SF appraised at $800,000 with a loan amt. of $440,000.00 with payments of $2,600.00 a month.
Please share your thoughts. Investor A's salary is stable. Been working at the job for 24 years. Investor B has been self employed for 20 years.
Thank you for your thoughts.
I live in San Francisco and I am going to buy investment property in either Tucson, Las Vegas or Laughlin, NV with my niece as my investment partner.
Here is the deal on the loan:
The loan is for $250,000
1st loan at 6.50% for $200,000 for 5 years - interest only
2nd loan at 9% for $50,000 for 5 years - interest only
this is for the 20% down payment
payments for the loans
1083.33 - lst loan
375.00 - 2nd loan
55.00 - approx. ins.
135.00 approx. property tax
1648.33 for total of everything
The reason why this loan is high is because it is stated income only.
We are not putting any of our money down for this property. We have money put away for about 2 yrs. payment if the property is not going to be rented.
The only thing out of pocket will be the closing cost of about $5,000.
The mortgage broker wanted to charge us so many fees and I made him take off the fees, so he will come back on Oct. 10 with a better closing cost for fees, hoping that it will be under $5,000.
The property management fee in Las Vegas and Laughlin is 10% of the rental. Tucson is free for the first year and then 10% thereafter - only if I buy from this realtor.
Is it better for us to put the 20% ourselves instead of borrowing at 9%? Is an interest only loan a better option to go compared to a conventional loan? The loan can be amortize with extra payment?
Investor A - salary per year $97,256
Investor B - salary per year $100,000 to $120,000 - self employed
Investor A already has a 2nd house in Laughlin, which is paid off.
Loan on SF house is 470,000 at 2752.00 a month. House in SF is $850,000 appraised value as of 6-1-05.
Investor B has a house in SF appraised at $800,000 with a loan amt. of $440,000.00 with payments of $2,600.00 a month.
Please share your thoughts. Investor A's salary is stable. Been working at the job for 24 years. Investor B has been self employed for 20 years.
Thank you for your thoughts.
slumlordfrank
10-08-05, 11:07 AM
You asked for my thoughts, but I doubt you're going to like them. This is not an investment, this is bordering on LUNACY. Hope I didn't make you too angry, but I hope I got your attention.
NEVER, NEVER, NEVER, do anything for a TAX WRITE OFF. Our taxes are at historical lows. Why would you INVEST to LOSE MONEY. You are PAYING the bank ONE DOLLAR, in order to prevent PAYING the government 28 CENTS. IMO that's lunacy. You could give your church, boys and girls club or animal rescue league the dollar and accomplish the same thing!
You say you're not putting any of your money into this deal, yes you are, you're putting $250k of your money into it. I would sit down with my CPA and ask for his opinion. If he says it's a good idea, GET A NEW CPA.
Just my opinion.
frank
NEVER, NEVER, NEVER, do anything for a TAX WRITE OFF. Our taxes are at historical lows. Why would you INVEST to LOSE MONEY. You are PAYING the bank ONE DOLLAR, in order to prevent PAYING the government 28 CENTS. IMO that's lunacy. You could give your church, boys and girls club or animal rescue league the dollar and accomplish the same thing!
You say you're not putting any of your money into this deal, yes you are, you're putting $250k of your money into it. I would sit down with my CPA and ask for his opinion. If he says it's a good idea, GET A NEW CPA.
Just my opinion.
frank
dkdk100
10-08-05, 05:08 PM
Frank:
I am not angry at your reply. Thank you for your thoughts. I am having seconds thoughts myself with this loan. I could buy rental property in Mohave Valley in AZ for 167 for a brand new house, going in with my niece for investment. We could put the 20% down. What are your thoughts?
I will definitely consult with a CPA. Thank you for the suggestion.
What would you do with $40,000 sitting in the bank earning 2% interest? Should I invest in real estate? I already invested 29% of my salary in 401K and I have 247+ in there? Maybe, I should lower my investment and put the money in good use someplace else like rental property. The only place I can afford to invest would be AZ and NV. SF Bay Area is out of my reach.
The house in Laughlin is for my retirement which is about 7 years away. I can't touch my 401K now as I am not 59 1/2.
I am not angry at your reply. Thank you for your thoughts. I am having seconds thoughts myself with this loan. I could buy rental property in Mohave Valley in AZ for 167 for a brand new house, going in with my niece for investment. We could put the 20% down. What are your thoughts?
I will definitely consult with a CPA. Thank you for the suggestion.
What would you do with $40,000 sitting in the bank earning 2% interest? Should I invest in real estate? I already invested 29% of my salary in 401K and I have 247+ in there? Maybe, I should lower my investment and put the money in good use someplace else like rental property. The only place I can afford to invest would be AZ and NV. SF Bay Area is out of my reach.
The house in Laughlin is for my retirement which is about 7 years away. I can't touch my 401K now as I am not 59 1/2.
slumlordfrank
10-09-05, 11:03 AM
Well I know you folks in CA have lots of assets sitting in your houses, but 247 in a 401K is WAY LOW for your age. IMO you should have about 4X that much. I would increase my 401 contribution and not do any more RE deals.
A house that sells for 167 has to rent for a MINIMUM of 1700/month or I won't walk across the street to look at it. I doubt that those places are bringing close to that. RE is only a deal if you (a) buy it well below market or (b) own it in a place during times of record inflation. No one can predict the inflation and you don't have a "wayback machine" to go back and buy more Bay Area or LA real estate. Stay well away from long distance RE investing.
frank
A house that sells for 167 has to rent for a MINIMUM of 1700/month or I won't walk across the street to look at it. I doubt that those places are bringing close to that. RE is only a deal if you (a) buy it well below market or (b) own it in a place during times of record inflation. No one can predict the inflation and you don't have a "wayback machine" to go back and buy more Bay Area or LA real estate. Stay well away from long distance RE investing.
frank
djosephs
10-10-05, 09:36 AM
My wife and I have real estate investments and our salaries are way lower than yours. We use a line of credit on our primary residence at a rate of prime minus one (no closing costs) for downpayment and closing costs on our investment purchases. We get conventional 30 year fixed rate mortgages at rates between 5 7/8 and 6.5. Our properties vary graetly in cost and value. The rents all cover the expenses (PITI, maintanence, repairs payment on line of credit) and we have positive cash flows of between $300-600 per month. The properties are basically 100% financed and have provided us with monthly income plus incredible appreciation. We always put down at least 20%. Our next move will be to set up a line on an investment property at prime plus one (no closing costs). Our properties all have at least40-50% equity. Our primary residence still has over 50% equity.