New to Real Estate · Member since 2019 · 38 posts · 11 votes
Good morning,
I was looking for some help figuring out what I should offer on this house (would be my first property). Here is the situation. It's a small 3/1 in a d2 college town located about 5 minutes walking from campus. The house was sold in 2021 for 150k to the current buyer (brother's girlfriend). It is 1,008 sqft. The most recent comps are from Oct, the rest are may-sept last year. The comps are between $118-$141/sqft, but it was purchased at $148/sqft.
The loan is assumable at 2.75% rate ($139,383 principal remaining) but will cost $900 application fee and between 1-5% of purchase price (assuming 2.5%). The estimate is that the house is worth about 160-170k based on comps. It is in good shape but probably needs 2-3k worth of cleanup to make rent ready. Oh and based on research it would rent for about 1.1k on avg
I have used the calculator to try and crunch the numbers but I do not know how to layer in the loan assumption.
Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
2y
I would try to buy it for the loan balance of roughly 140k since that is around 87% loan to value based on a value of $160,000. The cost for the assumption of $900 and the 2 1/2% would just be added to the loan assumption amount and that would be the total basis. So $139,383 + $900 + $3500 (3.5%) + repairs = $143,783 + repairs would be your total.
A more important question is how much is your PITI payment versus your $1100 a month rent payment (assuming you're going to rent the property) since you want cash flow.
Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
6mo
Running these exact numbers right now so you can see how this works.
Assumed loan: $139,383 at 2.75%. The current market rate is around 6.75% on an investment property (higher than primary). Let's compare:
**Scenario A: Assume the 2.75% loan** Monthly P&I: ~$615/month (roughly 27 years left on the term) Taxes + insurance on a $160K home: ~$200,225/month Total carry: ~$840/month Rent: $1,100 Cash flow: **+$260/month before vacancy/repairs**
**Scenario B: New loan at 6.75%** You'd need to borrow roughly $160K (assuming 10% down, $16K). P&I on $144K at 6.75%: ~$934/month Taxes + insurance: ~$200 Total carry: **~$1,134/month** Rent: $1,100 Cash flow: **-$34/month before vacancy/repairs**
Same property. One deal works. One doesn't.
The equity gap here is roughly $21,31K depending on your agreed purchase price. That's cash you bring to closing on top of the assumed loan. Factor in the $900 application fee and your 2.5% closing assumption fee (on $160K that's $4K). So total cash in is probably $26,36K depending on where you land on price.
One thing to flag: FHA assumable loans require the buyer to owner-occupy. If you're planning to live there and rent rooms, you're fine. If it's a straight rental from day one, the lender won't approve the assumption. Worth clarifying before you go deep into this.
If it IS your primary, the return math is strong. $260/month positive carry, loan paydown, and appreciation in a college market is solid for a first deal.
What's your plan for the property . house hack, or pure rental?
The Assumable Guy544 Reviews