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Updated over 9 years ago on . Most recent reply

User Stats

51
Posts
11
Votes
Dev Why
  • Renter
  • Norwich, NY
11
Votes |
51
Posts

Analyzing a property using 2% 50% Rule using an FHA Loan

Dev Why
  • Renter
  • Norwich, NY
Posted

How do you analyze a rental property if you know you are going to use an FHA loan for your first deal, while using the 2% and 50% rule? I know how to do the rules but how do you incorporate the right numbers If you know you are going to use an FHA loan on your first deal.

Example: 123 Carter street is a triplex on Zillow.com. Property costs $100,000. All the rentals are $650 a month. Mortgage for a 20% down 30 year fixed loan is $325.

50% rule: $650*3=  $1950 Total Income

$1950* .5= $975

$975-325= $650 Cashflow

2% Rule: $650*3= $1950 Total Income

$1950/$100,000= .0195= 1.95%

Question: How do I use these rules if I know I will be using an FHA loan for my first deal? or How do I set up the numbers if I will be using an FHA loan for my first deal?

(I know these are just rules that should not play into the final factor on buying the property, I am just trying to get through the first part in analyzing a deal seeing if I should do more analyzing on it or not using these two rules.)

Most Popular Reply

User Stats

98
Posts
99
Votes
Aleksandar Popivoda
  • Investor
  • NW Indiana
99
Votes |
98
Posts
Aleksandar Popivoda
  • Investor
  • NW Indiana
Replied

Using "50%" and "2%" rules doesn't have anything to do with the way how you are going to finance your deal. Financing your deal is only important to predict Cash flow and overall Rate of return on investment. Calculate how much is your Debt service payment and subtract it from NOI (50% rule) and you will get your Cash flow.

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