Real Estate Deal Analysis & Advice
Market News & Data
General Info
Real Estate Strategies

Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal


Real Estate Classifieds
Reviews & Feedback
Updated over 15 years ago on . Most recent reply

Analyze This
Duplex
Asking Price: $150,000
Gross Potential Rent: $1,900/month ($950/unit)
Taxes: $263/month
I have been pre approved for convential loan assuming 80% ltv @ 5.875% interest, 30 years.
Here's the catch: I only have $13,000 in cash. My parents have loaned me $18,000 for the down payment @ 5% interest for 10 years.
I have been stumped on calculating ROI for this property... I would have to somehow average out the two loans. Help.
Most Popular Reply

Nothing complicated involved. The answer is 1.6% cash on cash return.
If you only have $13K and pay $150K and a 20% down payment, you need more like $21K from the parents. You'll have $3-4K in closing costs, loan origination fees and prepaid expenses (taxes, insurance), so you'll need about $33-34K
Rent: $1900
Expenses: $950 (50% rule)
NOI: $950
Payment 1: $710 ($120K, 5.875%, 30 years)
Payment 2: $223 ($21K, 5%, 10 years)
Cash flow: $17/month, $209/year
Cash on cash return: 1.6% ($209/ $13K)
You're paying too much. Using your pretty nice interest rate of 5.875%, the most you can afford to pay is about $126K
Payment: $745 ($126K, 5.875%, 30 years):
Cash flow: $205, $103/unit
With that price, you can get by with about $15K from the parents. Now it looks like:
Payment 1: $596
Payment 2: $159
Cash flow: $195/month, $2,336/year
Cash on cash return: 18%