Critical Mistakes for the Investor to Avoid: Down Payment
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors
When an Investor is looking to purchase Investment property there are many different factors to be considered in every transaction - especially true if we need to make sure there is a positive cash flow every month.
One such critical decision that must be reached before the offer to purchase real estate can be consummated is the buyer must determine how much of a down payment he (or she) will be putting into the deal.
In the past, investment property typically required a minimum 20% buyer contribution - which made a property cash flow much easier. More recently many investment loans were available with only 90% cash-in. There have even been some creative loan packages that would allow a well qualified investor to finance an investment property with 100% financing - although I do believe that has disappeared fro the time being.
Lets assume a 6% interest rate on a $300,000 investment. A 100% financing would require the buyer to pay $2,206 a month in Principal, Interest, Tax & Insurance (PITI). The same home with a 10% down-payment would reduce the monthly PITI down to $2,026 and a 20% down-payment would then bring the monthly obligation down to only $1,846.
If this property will only rent for $1,500 a month, then you had better be prepared to step up the down payment to a whopping 39.33% or $118,000 if you want a 2% positive cash flow every month
So. I am hoping that you can see how a simple adjustment to the amount of money you put down on a deal will have a significant impact on your monthly cash flow.
I hope this little lesson will at least enlighten you to fully analyze your financing for your next real estate investment opportunity.
If you would like to know how I can help you achieve your investment objectives please feel free to contact me directly. I am not a "guru" selling books, CD's, DVD's and I don't even have my own seminar tour to invite you to. Like you, I am looking for serious individuals to partner with. My role is REALTOR®, focused primarily in Riverside County but licensed to buy and sell real estate all over the State of California... and yours is Investor. Yes, we can both do our job without the other, but why? Together we can create some much quicker profits for each other. So please, if you want help, consider me as your REALTOR®
Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,
John Occhi, Hemet CA REALTOR