Would love some input!!

[doogan]

Hi everyone, I would love some input on the following situation. I am basically trying to figure out the best way of financing a condo purchase.
my situation: working full time,  six figure salary, credit in 690/720 range. have current 7/1 mtg on home. Have some cash to play with

I want to buy a condo and get + cashflow from tenants.  In the area i have selected, they run from 200 - 250 and up. A new 2 bed condo at 250,000 will get you rental income of about 1450.
For to bring this to positive cashflow i  need to put down about 30%. This is with an approximate interest rate of 6.5% and 2K taxes + common charges. I don't want to put down so much - would prefer to keep the cash for next investment.

what are the savvy options for financing property such as this. Are COFI, COSI etc good solutions ( jsut started reading on those)

Can loans be structured different to achieve better interest rates..?

How do i bring this situation into positive cash flow without putting so much down - or is it just not possible with the current interest rates

any advise/ thoughts greatly appreciated

thanks

[4EEM]

Interest rates are not and are not the problem.  The historic low rates of the last few years sent prices through the roof in some markets.  It seems that your market is one of those.  

The ARMS you mentioned will be comming due on many people in the following months and year...you will see prices decline as many people are forced to sell for a loss (in cases of 100% financing).

I would suggest holding off for a while and looking for better deals in your home market or looking in another market all together.  

Rates are still low.

As a rule of thumb if the property would not break even or cash flow at 10% on 100% of the purchase price you should be looking else where.

[Buckeyes]

I don't know enough about the market conditions in your area to knowledgably comment on that deal for you, but I can tell you that in my area, that would be WAY too much money for a 1450 monthly return.  I would think the best you could hope for with those kinds of #'s would be to break even and rely on appreciation to eventually make money, and that is not a strategy I would ever be interested in.  I do agree w/ you that putting 30% down to make a deal cash flow a little bit would be a bad use of your money.  If you have that kind of cash and are looking for a good investment, give me a call and...................... just kidding.  Have you considered looking into markets outside your local area to find more profitable deals.  My general rule of thumb is monthly rent should be greater than 1% of purchase value.  For example:  1000 rent = 100,000 purchase price would be MINIMUM I would consider, and that would only happen if I REALLY liked the property and truly expected good appreciation.

Again, what I can expect and look for in my market is different than you can look for in yours.  Ohio has horrible appreciation rates, so I have to see strong cash flow.


Good luck, there's money to be made out there somewhere for you.

[4EEM]

Buckeye is right.  I am also in Ohio and while we have not had strong appreciation (on average it keeps pace with inflation) we have cash flow.

In RE cash is king.  

You can pick-up a property in central ohio with 100% financing and cash flow...no problem.

I would rather own 10 properties where I don't have to invest a dime of my own money that have mild appreciation than 10 properteis where I have to invest 20-30% of my own money to break even and HOPE that values go up.

[doogan]

Thanks guys - that makes sence. i live in an area where condos are waay off limits or investment in the hops of renting.. ( small 2 bed in 400 +) so when i located this area where they are in the 200's i thought i was elected. I have located another 2 area's within an hour from my house and i am starting to research the area. prices are lower - but rents are also slightly lower - so i guess i have to do the math and see if it works.

[Lendinghand]

I would go with a conservative option arm, and a heloc on the second w/ no ppp..  

current rates = 4.75% on 1rst
                        11.125% on second..

take out a 0% interest credit card for 12 months.. free up the heloc after 1 month... and you have a condo at 4.75% interest only payment for 5 years...  

100% financing... no money down..

[henryinma]

I would go with a conservative option arm, and a heloc on the second w/ no ppp..  

current rates = 4.75% on 1rst
                        11.125% on second..

take out a 0% interest credit card for 12 months.. free up the heloc after 1 month... and you have a condo at 4.75% interest only payment for 5 years...  

100% financing... no money down..

I'm not sure I really follow this. I thought an option arm has an interest rate that changes every month, you only get that low rate for the first month. Most option arms are tied to the MTA and the current rate there is 4.432. Margins are typically in the 2.5-3.5% range depending on whether you have a prepayment penalty or not. So now you're talking between about 7%-8.5% on the option arm. If you're just paying making a payment that's less than the 7% interest, then you're just doing negative amortization and that'll catch up to you when you sell and you have a bigger balance than when you started.

Sounds like you're saying there's some kind of option arm that's fixed for 5 years? How does that work and who has it? Also those 0% teaser rates have only been good for about 5-6 months and you do have to pay a bit if it's a cash advance. Also for a 250k condo, that's 50k on a 2nd and that's kinda hard to do on credit cards. Probably requires at least 100k worth of credit as those cash advances are usually limited to less than half of your total available credit, sometimes only 25% of total credit and not all your credit card companies are going to offer it. Sounds good in theory though.

[Mtg Master]

There is an Opton Arm that has a 5 year fixed PAYMENT that is calculated at a 1.75% 30 year am and also 2% on a 40 year am, 95% LTV's on Purchase / Primary Res, w/ # 620 scores, it is a Large lending institution and they service their own loans. They also do these loans on investment properties as well as second homes at a lower LTV's. Will also do stated 1099/ self employed not w-2. The only downside that I feel is that it is based on the LIBOR which has a higher index than the MTA, COSI, and COFI.

Thought the info might help someone......