What do you think of this loan? Is it a good deal?

[Yoni R.]

I need all the opinions I can get on this one before I make a decision. I purchased a SFH 2 months ago for $150,000. After going back and forth with Quicken Loans for "delayed financing" I just got a call from the agent and he offered me the following for my SFH which is registered under an LLC.

15 year loan

$138,700 is the loan.

$6,700 closing costs (which is factored into the loan) for a total of $145,400.

Interest on the loan is %4.875

Upfront costs are only $500 appraisal fee.

$3,000 in escrow for taxes and home insurance.

Monthly payment will be $1,375 which includes taxes and insurance figured in.

The monthly rent is $1,650 so that will leave me a cash flow of $275.

To remind everybody this is a SFH that I purchased 2 months ago and should be appraised at around $210,000. The house is in an LLC.

What do you think? Does it sound good? Should I go for it? Is there anything I should ask? Am I missing anything?

[Russell Brazil]

Originally posted by @Andrew Johnson:

@Yoni R. How many other lenders have you called? Since you're in an LLC you're not going to get the good ol' 30 year fixed rate mortgage but I would have thought someone would have offered a 20 or 25 amortization schedule instead of 15. That said, I've never looked at a commercial loan that small before so it's something I haven't dealt with. Since you do have it in an LLC have you talked to regional banks in the area? I don't think there's much wrong with the rate, you'll be stuck with stuff in an escrow account, etc. but it's the amortization table that's going to kill you.

That said, you'll never get *actual* cash-flow on $275 per month.  That will get eaten up with vacancy, break/fix repairs, eventual cap-ex, etc.  It's the nature of the beast.  But if you can ride it out you should have something viable at the end of 15 years.  Alternatively, if it's really worth $210K you could always sell it for $210K.  You'll eat some realtor fees and closing costs but you should still clear, what, $40K?

You are right about the LLC problem...Quicken is just incompentent and doesnt realize they cant do the loan yet. Hes going to end up going 3 weeks in, pay for the appraisal then the loan is going to get denied towards the end.