2012 MORTGAGE MYTH #3
Hard Money (aka Private Investor) Loans are a bad deal – Opportunity abounds for Real Estate investing throughout the country. In certain areas, like Las Vegas, property values are disproportionately low, compared with rents. So even with a Hard Money Loan at 12% interest, the interest only payment can still be very favorable. Take this example: A client buys a rental property for $80,000 with 25% down. The payment is 1% interest only - $600 per month. Assuming taxes and insurance are $120 per month and the home rents 11 out of 12 months each year for $1,000, the home would have a positive annual income of $2,360/year. Assuming $12,000 in acquisition costs and initial repairs, the total initial investment is $32,000. The resulting Return on Investment is 7.375%. This is for illustrative purposes and it shows a realistic scenario where even a Hard Money Loan can be beneficial to a client. Of course all investments have risks and clients should consult Professionals before investing.
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