New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
Hola! I'm in contract for my first investment property and I'm wondering where in my financial analysis are the following considered when analyzing costs: appraisal, inspection, title insurance, closing costs, and in my case, I paid for the year's insurance up front.
Do I add these to the overall purchase cost? Or add these to what my down payment is (20% + these costs)?
New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
9y
Right, but like where exactly? ie $20k down on a $100k purchase price. And let's say insurance, appraisal, inspection, misc closing costs etc = $3k. Would you then say you're putting down $23k on a $100k purchase, or you're putting down $20k on a $103k purchase? Or does it not even matter?
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y
John Galang
Down payments are down payments.
Closing costs are closing costs.
Together they equal total invested in the property in the analysis plus rehab if needed.
Closing costs include all of the expenses to make the transaction happen from appraisal to inspection and bank fees and 6 months of taxes and 1 year of home insurance. Closing costs change a lot all the way up to closing. So, down payments and closing costs are two separate conversations, but in your analysis they will ultimately be included in your investment.
New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
9y
Ok. I get it! When calculating ROI, take annual net cashflow and divide by ALL cash invested (downpayment, appraisal, inspection, annual insurance paid et al.)
For SFH, inspection cost is negligible ($300-500) and can be ignored. For simpler math, use SFH purchase prices and net cashflow. Yes remodeling cost needs to be considered since it can addup.
Rental Property Investor · Russellville, AR · Member since 2014 · 684 posts · 509 votes
4y
For you initial analysis, add them to your down payment. So in your example, you would analyze for $23k invested at the time of the purchase. The property is still valued at $100K, everything outside of the down payment can be considered as the cost of buying a house (for services).