All Forum Posts by: Account Closed

excellent. Another great way to think about the opportunity costs because there is more than one as you pointed out. The opportunity cost to not build.

New construction is going for 300/sq foot and above so after market value around 900k. The 150/sq foot construction costs didn't include soft costs like demo, architectural designs, and landscaping (another 50k maybe). Add a 3-5 pct contingency I am probably low 800's all-in. This probably represents a 50-100k profit. Compare my 50k opportunity cost to build and not sell (the one I identified initially) with my opportunity cost of 100k to not build (the one you identified Lynn) and the former is clearly better. I think I have been stuck in a grass is greener attitude where I thought I could probably sell for 350 and find a better lot (location, bigger). Maybe this attitude anchored my thoughts about fair value of the land as it might justify a sale. Thanks Lynn!

The lender would review the previous two years W-2's or return but your most recent two pay stubs would be used for qualifying income. If you earn more now then you did in 2013 use the most current income to calculate.

Mike - Congratulation on your search for a new home. FHA is definitely a great product for people new to home ownership. A person new to this type of finance should become familiar with the basic math and computations. You will benefit greatly from learning these personal finance topics. Search for an amortization calculator on-line.

If you wanted to back into what your eligible loan amount would be based on payment, set up an excel schedule with a placeholder for a loan amount, and then use the PMT function to calculate the monthly payment. To find out the loan for any given payment, you can use the goal seek function in excel to solve for the desired payment, by changing the loan amount.

You can go conforming all day with a 690 FICO and low DTI's.
Take a look at the Fannie eligibity matrix-
https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf

Take a look at this website and their daily mortage survery on the homepage- it will give you a good idea of best executed rates for various products (30 years fixed, ARMS, etc.)

http://www.mortgagenewsdaily.com/

What's the other use in this mixed-use property? Office? Retail? I am only speculating on the profile of the qualified borrower. I once did a case study in an exec MBA RE finance course that dealt with pro forma analysis on two large multi-family projects in Boston. I contacted an old friend in Boston who works in multi-family for a big commercial firm to discuss the outcome of the property as the case study was based on a real world scenario. He told me it sold to an institutional investor (think Fidelity, State Street, etc.).

So to answer your question I would say the profile of the successful borrower is probably an institutional investor--maybe even a REIT. If a smaller outfit, I would say they would need a strong track record for successful investments in multi-family and have great operating partners in management.

The borrower could raise funds in the form of debt or equity. The debt might look something like a traditional mortgage with terms of 10-20-30 years, and LTV limits might look similar too (70-80%). But more than likely the pro forma cash flows and NOI would drive the loan limits with a maximum debt service coverage ratio. Any lender or equity partner would be sure to beat up your assumptions in the pro forma; market information like base rent, growth rates, CPI escalation and vacancies.

I dont have experience in bond financing but in various parts of treasury (debt and capital markerts). Getting a letter of credit would be difficult if it wasnt collaterlized by some asset-- you have other real-estate to pledge perhaps?

Well to take an idea out of my old mortgage broker playbook from 10 years ago with a slight modification. You could look for mortgage holders that have arms adjusting in the near future and owe more than the house is worth-- they would have limited options for refi and selling may be their only option.

I'm not sure where the term originated but the term yellow letter does not refer to the color of the paper but a type of direct mail piece--a hand written less formal note to a home owner.

I'm a CPA and have to be careful not to give casual tax advice even when there is no formal client relationship. I couldn’t for instance talk casually at a dinner party about tax strategies. The nature of the relationships on this forum does seem rather informal, but I can imagine that both lawyers or accountants may want to protect themselves from malpractice claims even with informal communication on a message board. This doesnt explain why a non-licensed attorney or CPA would need such a disclaimer though!

Interesting article for any accountants or those curious- http://www.journalofaccountancy.com/Issues/2013/Jan/Tax-advice-20126598.htm