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Real Estate Professionals,
A recent transaction with an investor client caused me to stumble across a compelling case for all-cash purchase scenarios, so I thought I'd outline it here:  Asset Value: $400,000Down Payment: $400,000
Loan Amount: $0
P&I Payment: $0
T&I Estimates: $516
Gross Rent: $1800
Cash Flow: $1284/month
3% Commission on $400,000: $12,000
Now let's assume that instead of taking all of his cash and putting it into a single property, this investor buys two properties instead of one, and uses a 5/1 ARM at 3.500% for 50% of the value ($200K) of each property. Here's how things look now:
 Asset Value: $800,000Down Payments: $400,000
Loan Amounts: $400,000 P&I Payments: $1796
T&I Estimates: $1032
Gross Rents: $3600
Cash Flow: $772/month
3% Commission on $800,000: $24,000
So, effectively for this investor, the cost of owning two properties instead of one comes down to $512/month! And we're going to assume he or she is investing because there is a belief in the future increase of rent or in the future increase in value, or both.
Scenario 2 assumes this investor is creditworthy and has goals that support financing over an all-cash purchase. Realize too that we could have easily substituted a 30-year fixed loan for the 5/1 ARM if concern over rate stability was an objection. The point is, this 2-for-1 can be a very effective strategy for you, the Realtor. And done properly, the concept can multiply your commission in all-cash scenarios.
Let me know how I can help make it happen!
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Dogwood Real Estate Services - Hendersonville, NC
Hendersonville Living
US Bank - Larkspur, CA
Mortgage Loan Originator, Marin County
Rgoumiealtor? I don't even know what that is but I'm sure I've been called worse. :-)
Sep 27, 2011 10:20 AM
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002
Rob that is a great way to illustrate Opportunities for both Investors and Realtors and with today's interest rates this should be easily explained>
Oct 06, 2011 08:36 AM
Rainmaker
701,172
701,172
Rob Spinosa
Mortgage Loan Originator, Marin County
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