How to cashflow with 8.25% interest?

Question

Hello guys, I finally find a lender that can do a 45% down, 30 year fixed 8.25% interest rate for me (foreigner nationals). Is there a way that I get any cashflow from that kind of interest? I reside in Atlanta and is looking deals around Atlanta suburbs. But I may consider other areas if it's not possible here. I thought about the fixer-upper strategy but I think it will require too much time from me to supervise it.

Anyway, what is your opinion? Do you have any success with that? I would love to see some examples. And what is the max interest rate that you can cashflow in a repeatable manner?

Thanks!

Anyway, what is your opinion? Do you have any success with that? I would love to see some examples. And what is the max interest rate that you can cashflow in a repeatable manner?

Thanks!

Hanbin Y. · Answer

Chris MasonThanks for the reply. I am on a student visa so I do not qualify for the conventional loan.

Chris Mason · Answer

If you are in the country lawfully, and have established US credit, you should be able to do a plain old boring 30 year fixed at a competitive interest rate. Most lenders will go for this, with a copy of your (long term, not tourist) visa or other paperwork demonstrating that you are in the country legally. If you're really having problems finding a lender that knows this, it may simply be because Georgia doesn't have a particularly large immigrant population (I'm in CA, so this is normal for us - everything from Italians to Koreans to Mexicans).

If you are in the country unlawfully but have an ITIN, you will need to search far and wide for an "ITIN Mortgage Lender." Fannie Mae will back these loans ("you're here illegally, but you pay taxes, so we will look the other way"), so the terms shouldn't be too crazy. Certainly better than 8.25%.

Hanbin Y. · Answer

@Nuhan Demirkan Hello Nuhan, yes the return on my money is the next question. The loan does not have penalty for early payoff. The problem is I may not qualify for a lower interest rate in a few years, because I will be on student visa for a few years before I finish my PhD degree.

Nuhan Demirkan · Answer

If you are putting 45% down I hope you can cash flow. Otherwise you did not buy right. I think the question needs to be will I get enough return on my money. I would make sure that there is no early payment penalty on the note. Hold it for couple of years and do a re-fi to get out of the 8.25%. You may even pull out some of your cash out to do another deal.

Justin Fraser · Answer

It all depends on the numbers of the deal you are looking at. It sounds like you want to buy and hold. I don't know Atlanta, or any specifics, but it might help if you look at a quick theoretical example.

If a property costs $100k, you would put down $45k (plus closing costs), the loan would be for $65k. Using a mortgage calculator, you'll see that $65k over 30 years @ 8.25% interest is a payment of $488.32 per month. Let's assume this property meets the 2% test, and rents for $2,000 per month. Using the 50% rule of thumb, you divide the rent in half, then subtract the morthage payments to see an estimate of your cashflow. In this example, $2,000 / 2 = $1,000 - $488.32 = $511.68 cashflow per month.

You must know your numbers, because you can see how the equation will change for example, if the market rent is only $1,400 per month: $1,400 / 2 = $700 - $488.32 = $211.68 cashflow per month. I should mention that before you buy you should find out the actual expense numbers for taxes, insurance, maintenance, capex, vacancy, and management, rather than using the 50% rule.

The examples above are very theoretical, I don't know if there any deals like that in your area, but you can change all the numbers above and see how much cashflow you would have.

In general, the more money you put down on the property, the more cashflow you will have. However, your Return on Investment percentage will go down. You will have to determine what makes the most sense for your situation in your market.

Andrey Y. · Answer

Those terms are insulting. I would shop around, I am sure you can find better!