My friend that I’m doing a mortgage for is getting his parents property for less 70% of the retail value the numbers are arv $220,000 his price is $140,000 he is getting a loan for $175,000 his mortgage including taxes and insurance will be around $1400.00 he can probably rent it for $1000 max, what am I missing??? he is getting it pretty cheap and its still not producing cash flow. What would some of u pros do in this case??
As a general ‘ballpark SWAG’, the rent needs to be 1% of the sales price to generate a cashflow. There are a lot of factors that bear upon this (interest rate, taxes, insurance rates, ec., etc.) but 1 % is reasonably safe.
That said, your property would need to rent for about $1500 - 1750 a month to cashflow.
Frankly, $1K a month for a $220K house sux…
Sell it for $215k and make a nice profit. Use the profit to buy a cheaper house (or 5) that will cash flow. That’s what I’d do, but I’m no pro.
I think I would get the loan for 220k and have his parents gift him 80k Divide 80k by 500 per month So that is 160 months and/or 13.33 years by then the house should go up in value and or adjust the rent to cash flow!
Or have them (his parents) deed him the house and look into HELOC’s (home equity lines of credit) and get one for the 140k at 4.9 that would make the payment $743.02… This works if the house is paid off or not this way there is a cash flow of $250++
Or Or Or there are at least 10 ways to work this deal and cash flow!
I would do option 1 and have more money to work with! There are still other options if you want to hear them let me know!