Updated almost 17 years ago on . Most recent reply
Analyzing Deals
When analyzing deals, I see that many people analyze the deal and amortize the mortgage based on the asking price. Why wouldn't you analyze the deal after the downpayment since that will change the amortized mortgage payments, therefore, decreasing the monthly payments and increasing cash flow?
Just a thought...total newbie :roll:
Most Popular Reply
The purpose is to be able to compare deals "apples to apples"
Placing more money down on one deal does not necessarily make it a better deal than the other.
Similarily, in commercial, cap rates are commonly used which take into consideration only the gross income less operating expenses, arriving at the NOI (net operating income), therefore romoving any debt leverage from the equation. If you have two deals side by side and want to know which is better, having any financing removed from the equation allows you to fairly and accurately compare the two, or three, or four, or you get the idea.