Updated almost 8 years ago on . Most recent reply
Truly understanding the numbers on a deal
Hello,
My name is Brent. My wife and I are still VERY new to investing in real estate. We do have one single family property that we converted to a duplex to maximize returns. However, for us to move forward as better investors, I think we need to better understand the numbers. Our big question is this, why do we not include renos and down payment / closing costs in our bottom line of cash flow. For example, here are some numbers.
list price - $300K
dwn pmt - $60K
reno's - $60K
mortgage - $240K at 3.5% 30yrs amm.
rent $2650
monthly cash flow on mortgage only (after expenses and taxes and such) - $578
However, this cash flow doesn't include the down payment, reno's or closing costs.
That total for that is $60K + $60K plus $6K = $136K (dwn pmt, reno, closing)
Some investors don't have that money lying around so they'd need to borrow from somewhere, correct?
Say from equity at 3.5% $136K is roughly a $500/mo. payment.
Technically if the investor uses the initial mortgage cash flow of $578 to pay for the equity payment of $500, wouldn't $78 be the overall cash flow?
Would this investment be a good deal? Please help me wrap my head around the finances.
Thanks in advance.