Property Investment Calculator – Westpac New Zealand, property insurance calculator.#Property #insurance #calculator


Property Investment Calculator

Whether you’re buying your first rental property or you’ve done it before, you can use this calculator to help you do the sums. Get an indication of what it might cost you and what your return could be now and in the future.

Assumptions for projected returns

  • The projected estimated return assumes “estimated capital gain”, “interest rate”, “loan repayments” and “income tax rate” variables remain constant throughout the forecast period.
  • The projected estimated return applies inflation as an annual compounding gain on income, expenses and chattels depreciation from year 2 onwards.
  • “Estimated capital gain” is calculated as an annual compounding gain on the “Current estimated property value”.
  • The calculator calculates based on 365 days a year, and does not take into account leap years.
  • The calculator also calculates at 26.07 fortnights a year (365/14) and at 52.14 weeks a year (365/7).
  • Interest only loans for the entire term of the loan have to be repaid at the end of the loan term.
  • Interest only loans for a partial term will convert to a principal and interest loan for the remainder of the loan term.

This calculator provides indicative estimates (with some rounding used), and should be treated as a guide only. It does not take into account your personal situation ( financial or otherwise) or goals and does not constitute a quotation or offer by Westpac in relation to any product or service. The calculations are intended to be illustrative only, are based on the accuracy of information entered and incorporate a number of assumptions to do this (please see list of “calculation assumptions” above for details). No reliance should be placed on these numbers. We recommend you seek independent legal, financial and /or tax advice.

All applications for finance are subject to Westpac’s current home lending criteria. An establishment fee may apply. Interest rates quoted are subject to change. An additional fee or higher interest rate may apply to loans if application is accepted but does not meet the standard lending criteria.

Tax Disclaimer – The information shown in this calculator is intended as a guide only, and does not constitute tax advice to any person, and you should not rely upon the content of this information. Taxation legislation, its interpretation and the levels and bases of taxation may change. We recommend that you seek independent advice.

Westpac accepts no responsibility for the availability or content of any third party websites to which this page may link. All analysis is based on information current at the time of writing from sources that Westpac believes to be authentic and reliable. Westpac issues no invitation to anyone to rely on this material and expressly excludes any liability for any loss or damage of any kind arising out of the use of or reliance on the information provided in relation to this calculator.


10-Year Balloon Investment Property Mortgage, Home and Mortgage Center, investment property mortgage.#Investment #property #mortgage


10-Year Balloon-Investment Property Mortgage

Feel stable and secure in your home and in your payment plan.

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

OUR GREAT RATES

This payment example assumes a loan with points, a loan amount of $ and an estimated property value of . The property is located in Alexandria, VA and is within Fairfax county. The property is an existing single family home and will be used as an investment property. The rate lock period is 60 days and the assumed credit score is .

At a interest rate, the APR for this loan type is and the monthly payment schedule would be:

  • payments of $ at an interest rate of
  • payment of $ at an interest rate of

If an escrow account is required or requested, the actual monthly payment will also include amounts for real estate taxes and homeowner’s insurance premiums.

Features Benefits

  • Predictable payments
  • Free 60 day rate lock
  • For home purchases or refinancing
  • Loan amounts up to $424,100
  • Offer available on investment properties only

This is a 10 year fixed rate mortgage with a balloon payment at maturity. The loan is amortized over 30 years with the balance due and payable in full at the time of maturity. Loan matures in 10 years; you may apply to refinance the balloon payment at maturity.

NOTE: A 1% origination fee applies to this loan.

Funds can only be used to acquire, improve, or maintain rental property where the owner will not occupy for more than 14 days.

Investment Property Mortgages: For loan amounts from $25,000 to $ . Guam, Alaska and Hawaii maximum conforming loan amount $ . The maximum combined loan- to-value (CLTV) is 75% for purchases and limited cash-out loans (where funds will be used to pay off an existing first mortgage loan with little or no cash back) or 70% for cash-out loans (where additional funds will be obtained to acquire, improve, or maintain rental property above any existing mortgage, if applicable)

For purchase applications, please submit a copy of your fully signed ratified purchase agreement to [email protected] in a timely manner to ensure PenFed can meet your closing date.

The applicant is responsible for the following fees and costs at the time of closing: Origination fee, if any, appraisal fee, tax service fee, CLO access fee, title fees, transfer tax fees, credit report fee, flood cert fee, recording fee, survey if required and work verification fee, escrow reserves and interest due until first payment. Other costs may be included due to program specific circumstances. This is not intended to be an all-inclusive list.

Escrows may be waived if LTV is 80% or less in all states.

Additional reserve requirements may apply.

If you withdraw an application that was locked and reapply within 30 days, the new application is subject to worst case pricing.

All above disclosures apply to Non-Veteran’s Administration (VA) loans. VA loans have different guidelines and eligibility requirements.

All rates and offers are in effect as of , offered for a limited time and subject to change without notice. Restrictions apply to existing PenFed mortgage borrowers. Other restrictions may apply. Contact your PenFed mortgage consultant for any applicable additional restrictions and details about your loan. To receive any advertised product you must become a member of PenFed by opening a share (savings) account. Federally insured by the NCUA.

We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act.

ARM vs Fixed Rate Mortgages: Which One Should You Choose?

Investment property mortgage

With mortgage interest rates at an all-time low you’re probably thinking about finally taking the big leap and becoming a homeowner or refinancing your existing home to a lower interest rate. However, the age-old question looms in front of you…which mortgage should I choose, an ARM or a fixed-rate mortgage?

The answer: it depends on your needs. While there are pros and cons to both mortgages, the real question is not which mortgage is better, but which mortgage will suit my needs.

Let’s take a look at both an ARM and fixed-rate mortgage and then you can decide which option is going to afford you your dream home or that tantalizing interest rate that will have you running to refinance your home.

Adjustable-Rate Mortgages

Adjustable-rate mortgages or ARMs have interest rates that adjust over a period of time. ARMs have had a notoriously bad reputation because of the mortgage meltdown and subsequent recession.

While this reputation was justified in the past, most of those exotic ARMs no longer exist. Today, financial institutions offer hybrid ARMs—like PenFed’s 5/5 ARM, which has a fixed-rate for five years and then the rate adjusts once every five years. This is a unique mortgage product as most ARMs adjust annually after the initial fixed terms.

The thought of an adjustable interest rate probably has you fearing skyrocketing monthly mortgage payments. Fear not, all ARMs have caps—a limit on the amount the interest rate can adjust—and ceilings—the highest the interest rate is allowed to become during the life of the loan. Using PenFed’s 5/5 ARM as an example, the initial interest rate will change every five years by no more than two percentage points up or down (the cap). This rate will never exceed five percentage points above the initial rate (the ceiling).

Fixed-Rate Mortgages

A fixed-rate mortgage provides a reliable and fixed monthly payment for the life of the loan. Because your total mortgage payment remains stable from month to month, homeowners can easily budget their monthly expenses.

Financial institutions offer various fixed-rate mortgages including the more common fixed-rate mortgages: 15, 20, and 30-year. Out of the three the 30-year fixed is the most popular mortgage because it usually offers the lowest monthly payment. However, the lower monthly payment comes at a cost of paying more in interest over the life of the loan.

Some Considerations

So, now that you know a little more about ARMs and fixed-rate mortgages here are a few things you should consider when making a decision about which mortgage will best suit your needs:

  • How long do you plan to stay in your home? If you don’t plan to stay in your home for the long haul, you may want to consider an ARM, which has a lower interest rate than the 30-year fixed and you save big money in interest charges. If you move or refinance within five years before the interest rate adjusts you can avoid a payment hike. Conversely, if you’ve found or are already in the home of your dreams, a fixed-rate mortgage makes more sense and will provide you stable payments for years to come.
  • What can you afford? Knowing how much you can afford to pay month to month in mortgage payments will also help you decide between an ARM or fixed-rate mortgage. If you’re working within a tight budget, the ARM may be a more attractive option since the payments will be lower than a 30-year fixed. But, unless you anticipate a raise or another source of added income, ask yourself if you’ll be able to afford your mortgage payment when the ARM’s interest rate increases. If not, don’t take the risk. Go with the fixed-rate mortgage and get stable monthly payments.

The Takeaway: When it’s all said and done, the goal is to get you into the home of your dreams or refinance your existing home without breaking your pockets. Both the ARM and fixed-rate mortgage are products that will help you reach your goal. However, the path you take to get to your goal depends on which mortgage will suit your needs.

Investment property mortgage

The credit union is federally insured by the National Credit Union Association.


Mortgages on Investment Properties, The Truth About, investment property mortgage.#Investment #property #mortgage


Mortgages on Investment Properties

Investment property mortgage

Investment properties, also known as non-owner occupied properties, can be very profitable for casual homeowners and real estate investors alike. While there is no guarantee that you’ll be successful, extensive research and the right timing could result in a tidy profit.

That said, it’s important to know the demographics for a particular neighborhood, and whether the market is set to improve or decline in the near and long term. It’s equally important to find a tenant to rent out your property to ensure you’ll achieve positive cash flow immediately and continuously.

Achieving Positive Cash Flow

While it’s not imperative, positive cash flow will allow you to invest in other properties by minimizing losses and out-of-pocket expenses, which will keep your DTI ratio low. It s also quite important if the property you buy isn t expected to increase in value significantly.

Cash flow isn t as important if the property is expected to surge in value, but finding a property on the cheap with the potential to appreciate is the ultimate goal.

Discovering that “hot property” is often the impetus for real estate investment. But always take your time to investigate before diving in. Certainly pay attention to local area rents to determine if buying makes more sense than renting. If the price-to-rent ratio is considerably favorable, it could be a no-brainer.

And take special care when investing out of state, and especially out of the country. If you plan on buying an investment property in Mexico or Spain, do your research and make sure you’ve got a good understanding of the laws of the land. Ensure you’re working with a reputable broker or builder. Ask for references!

Obtaining Financing on an Investment Property

The next hurdle is obtaining financing on an investment property. Even if you’re familiar with how mortgage works, it’s important to understand the restrictions tied to investment properties as they often differ from primary residences and second homes.

If you plan on buying an investment property, be prepared to put some money down, usually 20% or more. The days of 100% financing on investment properties is a thing of the past because banks and lenders incurred heavy losses from massive defaults and mortgage fraud.

All that speculation during the previous boom led to widespread strategic default, with investors cutting their losses on properties they had very little if anything invested in.

Today, you may even need to put 30% or more down on an investment property depending on your credit profile, documentation type, number of units, and the value of the property.

For example, Fannie Mae limits the loan-to-value ratio (LTV) to 85% for the purchase of a one-unit investment property. That means you need at least a 15% down payment if you want to finance one. It drops to 75% LTV for a 2-4 unit non-owner occupied property. That increases your down payment to 25%!

But wait, it gets even more restrictive. If you want to take cash out on a 2-4 unit investment property, your max LTV drops to 70%. That means 30% equity is required, which might not leave a ton of cash available for extraction.

As you can see, the more complicated the loan scenario, the less you can finance. There s also the issue of mortgage rates, which will generally rise as the LTV and number of units goes up.

Another hitch is that gifts for down payment are not allowed on an investment property, for obvious reasons. One way around this is to occupy the property first and then rent it out in the future.

In fact, that s a great way to get started in real estate investment. You live in the house or condo for a period of time, and eventually rent it out and buy another property. Rinse and repeat. That way you know the ins and outs of the property, along with local area rents, and any other quirks. Ideally, you ll also live close by if anything goes wrong.

Also note that many exotic mortgage programs such as option-arms and interest-only limit financing on investment properties to 80% or less for the most part, so be prepared to come in with more cash if you’re looking for an ultra-low start rate or some sort of negative amortization program.

Lender Restrictions on Non-Owner Occupied Homes

Now comes the trickier stuff. Most lenders don’t like to lend to investors with over 10 investment properties. And many lenders have a limit to how much they will finance, so if you’ve got two loans with a certain bank or investor, they may not be able to provide financing on a third property if you’re over their aggregate financing limit.

Additionally, if you plan on buying an investment property within a condominium complex, note that investor concentration usually cannot exceed 50 percent. This means at least half of the units need to be owner-occupied. And if it’s a new development, usually at least 50 percent needs to be sold and closed before many lenders will provide financing.

Most lenders also limit the total percentage of a complex owned to 10 percent by a single entity, so if there are only 10 units, you can typically buy just one.

Of course, these rules vary from bank to lender, and often developers will provide special financing on site to new investors. But these issues can and often do arise, preventing investors from obtaining favorable financing terms.

So do your financing homework and obtain pre-approvals before making an offer or jumping into a contract. And be prepared to show up to the signing table with a hefty down payment or you’ll likely be out of luck.

Lastly, an important note about mortgage rates. Many investors forgo mortgage financing and simply purchase investment properties with cash. But not everyone has deep enough pockets to do that.

If you do plan to finance your non-owner occ property with a mortgage, expect sizable pricing adjustments for both occupancy type and multiple units, if applicable.

In other words, if you purchase a NOO 4-unit property, expect your closing costs and/or mortgage rate to be significantly higher compared to an owner-occupied single-family residence.

That s the price of uncertainty; investment properties inherently carry more risk and are priced accordingly. Yet another reason most investors try to buy with cash instead.


Balloon Mortgage Calculator: Commercial – Investment Property Calculator, investment property mortgage.#Investment #property #mortgage


Balloon Loan Calculator

This tool figures a loan’s monthly and balloon payments, based on the amount borrowed, the loan term and the annual interest rate. Then, once you have calculated the monthly payment, click on the “Create Amortization Schedule” button to create a report you can print out.

Current Mortgage Rates

Everything You Need to Know About Balloon Mortgages

A Balloon mortgage is a loan that doesn’t wholly amortize over the life of the home loan, resulting in a balance at the conclusion of the term. Consequently, the final payment is substantially higher than the regular payments. Obviously, the majority of homeowners who choose this type of financing plan on either refinancing prior to the term ending, or selling the property. A balloon mortgage requires monthly payments for a period of 5 or 7 years, followed by the remainder of the balance (the balloon payment). The monthly payments for the time period prior to the balloon’s due date are generally calculated according to a 30 year amortization schedule.

Why a Balloon Loan?

A balloon mortgage is often chosen by individuals who want to have low, fixed monthly payments, with the end goal being to sell the property (often investment properties), at a profit prior to the balloon payment coming due.

What Are 15 Year Balloons Used For?

A 15 year balloon is a form of home loan in which the homeowner makes principal and interest payments for 15 years. Subsequently, at the conclusion of the 15 year term, they are required to pay the amount of money still owed. The 15 year has also become a preferred loan choice for a second mortgage in a piggyback agreement. It’s becoming more and more common for borrowers that put less than 20% down to opt for piggyback options instead of purchasing mortgage insurance. A piggyback can be a first mortgage for 80% of the home’s value and a second mortgage for 5% to 20% of value, depending upon how much the borrower puts down as a payment. In some cases the second mortgage is an adjustable rate; however an increasingly common option is the 15 year balloon.

Paying Off Your Loan Early Vs. Conserving the Money

Property owners who have the available resources to make a partial or full early payment on their balloon amount have the advantage of selecting from a number of different options. Your best option is dependent on your financial goals and any other investment or savings options you have. One of the main variables that determine whether it’s a better idea to pay off the balloon ahead of time is the interest rate on the loan in comparison to the interest that could be earned from investing the money elsewhere until the balloon is due. If the loan carries a higher interest rate, you would save money by paying the balloon off early. It’s important to keep in mind that an early balloon payoff requires that you pay not only the balloon amount, but any principal reduction that would be included in the regular monthly payments that are yet to be paid. One last consideration with investing or paying down your loan would be the tax implications. People in a higher tax bracket have to earn a significantly larger rate of return in the market for the after-tax returns to match the yield on paying off their debt early.

Refinancing a Balloon Mortgage When You’re Underwater

Investment property mortgageA mortgage debtor with a balloon balance higher than the property value faces challenging problems. Since no other lender will refinance an underwater home, either their current lender will need to refinance it or the homeowner will be pushed to default. In some cases an offer might be presented by the lender to extend the term of the loan for an additional 5 years at the same rate.

If you’re underwater, keep in mind that your current lender is aware that you don’t have any other option but to default, a fact that would inflict a substantial loss on the lender. A considerably better result from their standpoint would be to refinance which would keep your payments coming in and give you an opportunity to pay off your mortgage. In some cases the lender may be willing to modify the terms of your loan as well, relieving your payment problems. Basically, whatever deal emerges, you’ll be able to negotiate and if your lender understands that you see your choices as either defaulting on your mortgage or refinancing at terms you can handle, they’ll more than likely be reasonable.

Advantages Disadvantages

Advantages

If you’re wondering why a homeowner would decide on a balloon mortgage instead of a fixed or adjustable-rate mortgage, the answer is that balloon mortgage rates come at a discounted APR, making them a more affordable alternative early in the term. An example would be that if you don’t plan on keeping the property (or loan) for more than a few years, a balloon would be a viable option. That being said, there are always associated risks.

Disadvantages

The obvious negative aspect is the uncertainty at the conclusion of the loan term. For instance, after 7 years, the existing balance is owed. Just imagine if your property drops in value, leaving you owing more than the remaining balloon payment – you’d have a big problem on your hands if you can’t refinance or execute a short sale. This wouldn’t be the case if you had an ARM or fixed rate loan. ARMs may adjust higher, established by their caps which limit the amount the payments can rise, providing a certain level of protection. Even if you’re underwater on your loan, thanks to the caps, your payments will probably be manageable. Fixed rate home loans have the same payment throughout the life of the loan.

What is a Negative Amortization Balloon Mortgage?

Negative amortization develops when the monthly payment is less than the interest due which causes the loan balance to increase instead of decreasing. ARMs that permit negative amortization could increase the affordability of the home as well as provide lower interest rates, if the interest rates don’t rise consistently. As with just about everything else regarding finance, the benefits come with risks.

In conclusion

The most important thing you should do before you decide on a home loan is to evaluate all of your options and consult with a trusted mortgage broker/lender. You just might be surprised to find that today’s fixed rate loan rates may be better than a ARM or balloon mortgage and without as much risks.


A guide to property investment, investment property mortgage.#Investment #property #mortgage


High Demand, High Return

Scotland is a great place to live and offers fantastic potential for property investment with the prospects of high returns and strong capital growth .

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At DJ Alexander we believe that investing in property is a smart move, and we know how different a buy-to-let property investment can be to buying your own home. That’s why our consultancy process is designed to assist you on your property investment journey from start to finish with careful guidance and support from our property experts.

Each investor will have different aims and interests when building their portfolio, whether it be for capital appreciation or achieving maximum yield. With Glasgow and Edinburgh’s incredibly diverse choice of properties, every investor is sure to find their ideal investment.

Our Consultancy Process

We offer an individual service to all our clients – whether you are looking to build a large portfolio or purchase a single property , and whether you’re based anywhere around the world or just around the corner.

Investment property mortgage

Consulting & Advising

Personal Service. Honest Counsel.

Most people have already decided they want to invest in property when they approach us and simply want advice on taking the next steps on what can seem a daunting journey.

Whether you’re looking to buy one property or to build a portfolio, we’ll help you decide on location, tenant demographics, the term of your investment and your final exit strategy.

We’ll always be honest, advising you what to buy… and what to avoid. And because money and tax is every bit as important as bricks and mortar, we will keep you abreast of changing legislation and can put you in touch with specialist accountants.

Investment property mortgage

Identifying & Recommending

Local Knowledge. Impartial Advice.

The next step is to identify properties that suit your personal requirements. We don’t just endorse the properties we’re selling; we look at the whole market including any off-market opportunities we hear about.

We can send you details of our recommendations and also assess the ones you tell us about. If you are unable to visit any properties then we can arrange to view them on your behalf and offer our experienced feedback

After 30 years we know what makes a good rental property, and more importantly we know what doesn’t. We’ll advise on what makes a good capital investment for when the time comes to finally sell. It’s that combination of local knowledge and impartiality that really benefits our clients decision.

Investment property mortgage

Buying & Conveyancing

Legal Insight. Help and Support.

Within DJ Alexander Legal, there are specialists who can help you submit offers and guide you thought the buying proccess. From negotiating the sales price, arranging detailed surveys, right through to getting the keys. They can even recommend mortgage advisers and liaise with them on your behalf.

Naturally, as trusted advisers for clients around the world, DJ Alexander Legal have in-depth knowledge of the market and the unique properties available in Edinburgh and Glasgow. This enables us to avoid properties that may have a chequered past and it’s that local insight – combined with process diligence and attention to detail – that helps our clients to spot the difference between quirky charm and a potential money pit.

Investment property mortgage

Refurbishing & Project Management

Maximising Appeal. Realising Potential.

If you’re new to property investment, spotting a place with ‘potential’ can be both exciting and daunting. While undertaking minor repairs and cosmetic decoration may all be part of the adventure, fitting a new kitchen or bathroom could seem a step too far… And all may be impossible if you do not live locally.

At DJ Alexander we have an in-house project management team to help you prepare your property for letting and re-sale. We co-ordinate multiple trades and advise you on where to spend to get the best return for your investment. Our experts will also guide you through the latest letting regulations.

We can even furnish your property – down to the very last teaspoon.

Investment property mortgage

Letting & Management

Good Home. Great Tenants.

Once your property is ready we will use our unrivalled contacts within Scotland’s largest employers and advertise on high-profile websites before thoroughly screening all applicants to ensure we find you the highest calibre of tenant.

We are experts in making your life as a landlord as simple and rewarding as possible. Our service includes everything from setting up the lease and collecting rent, to property maintenance and emergency repairs. When your tenants move out we’ll find a new one quickly and efficiently – one of the reasons our occupancy levels are close to 100%.

Why choose property investment in the UK

  • Supply Demand

The UK’s population is predicted to reach 70M by 2020 compared to 63.7M in 2016 with a serious shortage of housing driving up property values. Between 2001 2014 the number of UK households in rental accommodation grew from 2.3M to 5.4M. By 2025 this figure is predicted to rise to 7.2M – almost one in four of the UK total.

  • Stable income

    Over the last 30 years, the yield from property has been consistently higher than most fixed interest securities and the dividend yield available from equities. Meanwhile, the relatively long-term nature of rental contracts can provide a stable income.

  • Guard against inflation

    Property has typically provided returns over and above the rate of inflation. This is important as it can protect your capital from the erosive effects of rising prices.

  • Diversification

    Investing in property as part of a balanced portfolio allows you to spread some of the risk over the term of your investment. This is mainly because the returns from property have a low correlation with those from equities and bonds over the long term.

  • Our selection of informative videos have been produced to help you on your investment journey

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    1. Buying an investment property

    2. Expanding your property portfolio

    3. Managing your rental properties

    4. Selling investment properties

    5. Investing in property for your children

    6. Buying property through a LTD company

    7. Changes in landlord legislation

    8. Trends in property investment

    City Statistics

    Scotland’s economy is expected to continue to expand strongly over the medium to long term, joined with a forecast of a rapidly rising population. This is fuelled by a global reputation for quality of life and cultural opportunities, excellent transport links and a stable jobs market. In 2016 one in seven residents in Scotland are living in rental accommodation, which is three times more than in 2000. Around 14% of all Scottish properties in 2016 were leased through a private landlord.

    Investment property mortgage

    For Edinburgh alone its population is forecast to rise by 60,000 in the next decade and could grow to be larger than Glasgow within 25 years. It is the second largest financial centre in the UK (and the fourth in Europe), home to a large number of blue chip employers – as well as the Scottish Government. Annually the various festivals held in Edinburgh bring £250million into the local economy with more tickets sold each year than the FIFA World Cup. The capital is also world renowned as a seat of learning with a student population of over 70,000. Edinburgh’s biggest restriction for economic growth is a shortage of housing, which is likely to cause an inflation of property prices.

    Investment property mortgage

    Glasgow is the fourth largest city in the UK with a population over 600,000. It contributes 32% of the Scottish economic output, 35% of its jobs and 36% of its exports, plus it is the renewables capital of Scotland with over 5,000 people working within the energy sector. With three colleges and five higher education institutions Glasgow has a student population of around 130,000. Property rental in Glasgow has risen by 20.6% in the past four years, and is forecast to continue to grow by a futher 20% by 2020. The City of Glasgow showed the biggest volume of property sales across Scotland in Q1 2016, proving that demand is outpacing supply – Good news for a growth in capital gain.


    Rental Property Calculator, property insurance calculator.#Property #insurance #calculator


    Rental Property Calculator

    Property insurance calculator

    Rental property investment refers to real estate investment that involves real estate and its purchase, followed by the holding, leasing, and selling of it. Contrary to popular belief, rental property investment is not passive income, especially if there is no management consultant hired to handle administrative work, a service that usually costs about 10% of income. People with real experience in the field often tout it as exhaustive work, whether standing by for another problem to arise, filing paperwork, or dealing with terrible tenants.

    Quick Tip: Performing background checks on prospective tenants can give the lessor a better idea of what to expect about a tenant, how the tenant may treat the property, and how likely the tenant may be to consistently pay rent.

    Commonly done for better returns, investors purchase cheap and inferior properties, such as foreclosures, then improve them before the leasing stage. For older properties, assume higher maintenance and repair costs. Rental property investments are generally capital-intensive and cashflow dependent with low levels of liquidity. However, compared with equity markets, rental property investments are normally more stable, have tax benefits, and is more likely to hedge against inflation.

    That’s not to say that rental properties aren’t worth the effort nor unprofitable. Given proper financial analysis in the decision making, they can turn out to be profitable and worthwhile investments. The Rental Property Calculator can help run the numbers.

    General Guidelines

    Real estate investing can be complex, but there are some general principles that are useful as quick starting points when analyzing investments. However, every market is different. It is very possible that these guidelines will not work for certain situations. It is extremely important that they be treated as such, not as replacements for hard financial analysis nor advice from real estate professionals, things that should always get the nod over overgeneralized guidelines.

    50% Rule – A rental property’s sum of operating expenses hover around 50% of income. Remember that operating expenses do not include mortgage principal nor interest. The other 50% can be used to pay monthly mortgage payment. With this, quickly estimate the cash flow and profit of an investment.

    1% Rule – The gross monthly rent income should be 1% or more of the property purchase price, after repairs. It is not uncommon to hear it proclaimed as the 2% Rule, but obviously, the higher the better.

    A lesser known rule is the 70% Rule. This is a rule for purchasing and flipping distressed real estate for a profit, which states that purchase price should be less than 70% of after-repair value (ARV) minus repair costs (rehab).

    Internal Rate of Return

    Internal rate of return (IRR) or annualized total return is an annual rate earned on each dollar invested for the period it is invested. It is generally used by most if not all investors as a way to compare different investments. The higher the IRR, the more desirable it is to make the investment.

    If there is one figure that is most important in acknowledging the profitability or relative success of any rental property to any other investment, it is the IRR. Capitalization rate is too basic in its computation and Cash Flow Return on Investment (CFROI) does not account for the time value of money.

    Capitalization Rate

    Capitalization rate, often called the cap rate, is the ratio of net operating income (NOI) to the investment asset value or current market value.


    Balloon Mortgage Calculator: Commercial – Investment Property Calculator, investment property mortgage.#Investment #property #mortgage


    Balloon Loan Calculator

    This tool figures a loan’s monthly and balloon payments, based on the amount borrowed, the loan term and the annual interest rate. Then, once you have calculated the monthly payment, click on the “Create Amortization Schedule” button to create a report you can print out.

    Current Mortgage Rates

    Everything You Need to Know About Balloon Mortgages

    A Balloon mortgage is a loan that doesn’t wholly amortize over the life of the home loan, resulting in a balance at the conclusion of the term. Consequently, the final payment is substantially higher than the regular payments. Obviously, the majority of homeowners who choose this type of financing plan on either refinancing prior to the term ending, or selling the property. A balloon mortgage requires monthly payments for a period of 5 or 7 years, followed by the remainder of the balance (the balloon payment). The monthly payments for the time period prior to the balloon’s due date are generally calculated according to a 30 year amortization schedule.

    Why a Balloon Loan?

    A balloon mortgage is often chosen by individuals who want to have low, fixed monthly payments, with the end goal being to sell the property (often investment properties), at a profit prior to the balloon payment coming due.

    What Are 15 Year Balloons Used For?

    A 15 year balloon is a form of home loan in which the homeowner makes principal and interest payments for 15 years. Subsequently, at the conclusion of the 15 year term, they are required to pay the amount of money still owed. The 15 year has also become a preferred loan choice for a second mortgage in a piggyback agreement. It’s becoming more and more common for borrowers that put less than 20% down to opt for piggyback options instead of purchasing mortgage insurance. A piggyback can be a first mortgage for 80% of the home’s value and a second mortgage for 5% to 20% of value, depending upon how much the borrower puts down as a payment. In some cases the second mortgage is an adjustable rate; however an increasingly common option is the 15 year balloon.

    Paying Off Your Loan Early Vs. Conserving the Money

    Property owners who have the available resources to make a partial or full early payment on their balloon amount have the advantage of selecting from a number of different options. Your best option is dependent on your financial goals and any other investment or savings options you have. One of the main variables that determine whether it’s a better idea to pay off the balloon ahead of time is the interest rate on the loan in comparison to the interest that could be earned from investing the money elsewhere until the balloon is due. If the loan carries a higher interest rate, you would save money by paying the balloon off early. It’s important to keep in mind that an early balloon payoff requires that you pay not only the balloon amount, but any principal reduction that would be included in the regular monthly payments that are yet to be paid. One last consideration with investing or paying down your loan would be the tax implications. People in a higher tax bracket have to earn a significantly larger rate of return in the market for the after-tax returns to match the yield on paying off their debt early.

    Refinancing a Balloon Mortgage When You’re Underwater

    Investment property mortgageA mortgage debtor with a balloon balance higher than the property value faces challenging problems. Since no other lender will refinance an underwater home, either their current lender will need to refinance it or the homeowner will be pushed to default. In some cases an offer might be presented by the lender to extend the term of the loan for an additional 5 years at the same rate.

    If you’re underwater, keep in mind that your current lender is aware that you don’t have any other option but to default, a fact that would inflict a substantial loss on the lender. A considerably better result from their standpoint would be to refinance which would keep your payments coming in and give you an opportunity to pay off your mortgage. In some cases the lender may be willing to modify the terms of your loan as well, relieving your payment problems. Basically, whatever deal emerges, you’ll be able to negotiate and if your lender understands that you see your choices as either defaulting on your mortgage or refinancing at terms you can handle, they’ll more than likely be reasonable.

    Advantages Disadvantages

    Advantages

    If you’re wondering why a homeowner would decide on a balloon mortgage instead of a fixed or adjustable-rate mortgage, the answer is that balloon mortgage rates come at a discounted APR, making them a more affordable alternative early in the term. An example would be that if you don’t plan on keeping the property (or loan) for more than a few years, a balloon would be a viable option. That being said, there are always associated risks.

    Disadvantages

    The obvious negative aspect is the uncertainty at the conclusion of the loan term. For instance, after 7 years, the existing balance is owed. Just imagine if your property drops in value, leaving you owing more than the remaining balloon payment – you’d have a big problem on your hands if you can’t refinance or execute a short sale. This wouldn’t be the case if you had an ARM or fixed rate loan. ARMs may adjust higher, established by their caps which limit the amount the payments can rise, providing a certain level of protection. Even if you’re underwater on your loan, thanks to the caps, your payments will probably be manageable. Fixed rate home loans have the same payment throughout the life of the loan.

    What is a Negative Amortization Balloon Mortgage?

    Negative amortization develops when the monthly payment is less than the interest due which causes the loan balance to increase instead of decreasing. ARMs that permit negative amortization could increase the affordability of the home as well as provide lower interest rates, if the interest rates don’t rise consistently. As with just about everything else regarding finance, the benefits come with risks.

    In conclusion

    The most important thing you should do before you decide on a home loan is to evaluate all of your options and consult with a trusted mortgage broker/lender. You just might be surprised to find that today’s fixed rate loan rates may be better than a ARM or balloon mortgage and without as much risks.


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