Updated almost 12 years ago on . Most recent reply
Understanding these numbers
I picked up a book " The Wall Street Journal Complete Real estate investing guidebook." Looks good so far, but I am trying to wrap my head around some math in here. If anyone could please break this down for me.
When evaluating if buying a property is the best use of money the author states
"Do the math: If you buy a $300,000 house with a 95 percent loan at 6 percent, and the house appreciated at 5 percent annually, you're just treading water."
$300,000 House
Loaned: $385,000
Downpayment: $15,000
6% of $300,000 = $18,000
Those are the specs I can pull out from this statement. Very confused on how the would be owner is treading water. If anyone can break this down for me, thanks! I am assuming the 6% interest may be the annual cost of interest on the loan... Thanks for the help
Most Popular Reply
Anthony,
They are referring to the interest the bank gives on the loan which is 6%.
No investor is getting 95% bank financing. Investors have to put down 20% + closing costs for all conventional bank loans.
- Curt Davis
