All Forum Posts by: Jay Dean

Thank you. By converting that PMI into the effective nominal interest rate increase equivalent, you made it much easier to compare the three choices.

My wife and I are under contract to buy a home.  We plan to do a live in renovation with the intent of making it a rental (selling only as a plan B).  The future plan includes buying another home, possibly fixing it up, staying for a bit, and then making it a rental.  The process repeats.

I am a buy and hold guy.  I don't have any interest in becoming a flipper but if I see a chance to get a big payday I will take it.  I am not seeking advice trying to pull me away from buy and hold as a primary strategy.

We have been presented with three financing possibilities and I am struggling to decide.

FHA 3.5% down 3.49% interest - Required mortgage insurance is $128.74

Conventional 5% down 4.25% interest - Required mortgage insurance is $96.27

Conventional 20% down 4.25% interest - No required mortgage insurance.

We have plenty of cash for any down payment and for the renovations.

I am struggling with:

- The idea of paying mortgage insurance.  

- Having a big chunk of our money (roughly $27,000 additional dollars toward the down payment) tied up in the home. 

- Having this home financed FHA (and not being able to get a second FHA loan).

- Going with FHA knowing the only way I will get rid of the PMI is to refinance (likely at a higher interest rate).

I welcome your input.

@Ben Wilkins My spreadsheet shows the numbers for each of the first ten years.  The numbers I listed is only for the first year.

@Jeff Petsche - I tend to be rather heavy handed with my estimate of expenses.  

My analysis is not for a one year buy and hold.  My goal is to see how each of the ten years will look.

This is a rental property analyzer that includes an analysis of the exit if / when the property is sold.

Shannon Quadros with Kilmer Crosby & Walker.  He offices here in Houston, but I am pretty certain they have a Dallas office.

The forum won't allow me to post a phone number here.

I am working on a spreadsheet for deal analysis and I need some input.

In my deal (year 1) I have $10,512.00 in income and $8,316.96 in operating expenses.  Thus, income less operating expense is $1,195.04. 

What is the term or name for "income less operating expense" and what is my target / goal?

For my loan, I have $674.98 in principal and $2,195.04 in interest in the first year.  Thus, I have $2,947.15 in loan expense in the first year.  Thus, my income less operating expense less mortgage expense is a loss of $752.11.

What is the term or name for "income less operating expense less mortgage expense" and what is my target / goal?

Finally, if I sell after year 1 it looks like this:

Sale price - $75,000.00

Loan balance due - $45,075.02

Equity - $29,924.98

Closing Costs - $5,625.00

Total Profit from Sale - $24,299.98

Income less all expenses - $752.11 (loss)

Total Cash Return - $23,547.87

Total Initial Cash Investment - $16,000.00

Have I used the correct terminology here and am I correct in saying that my cash on cash return is 147.17%

I can also send my spreadsheet if someone wants to PM their email address.

Thank you.

My two most favorite recent reads are Rich Dad, Poor Dad and Set For Life.

I am specifically seeking more information on general investment strategy and wealth building.  I don't necessarily need the real estate investment emphasis...  I have that figured out.

Please recommend another book that you have read fitting this profile.

Welcome to BP!

Welcome to the forums. You are in a great place.

You haven't really given us a complete run down on your income and expense estimates. You need to run these numbers. When you walk it the second time, see if you can get a contractor to come along. Your rehab cost ls are a key and important part of your analysis. Analyze the numbers and the deal. All of that said, this does not sound like a project for a first timer.