All Forum Posts by: Ryan Butler

Lender is charging two points of the loan amount as start up cost. Enter that cost into the valuation as a negative number. APR is the points and fees paid one time up front for your loan. The rate is the long term cost.

Use the PITI principle/Interest /(what taxes will be after being re-assessed)/ insurance / and HOA not just the rate. Taxes are around 1.25- 1.875 of sale price depending on location. Fire insurance is 3% in most places excepting California and Florida it's 1% now. The BP calculator is only going to give you a rough number and it will be more expensive than the calculator spits out.

Thanks for the response Caroline!

How do you know that it is two points? Is that the standard?

I have been using prev year taxes and included insurance est as well (not looking at condos so no HOA). When you say APR is one time cost and rate is long term does that mean I only pay APR rate at the time of sale and then starting first month it is only the interest rate (along with taxes/ins)?

0 Votes

Boston, Massachusetts

Quote from @Andrew Postell:

@Ryan Butler please use the interest rate in the calculator. The APR is the "cost" of your loan. So if you took all of the fees and counted them as interest, what would that look like? That's what the APR is - it's the interest rate + the fees (if the fees were interest) to give you a true comparison. Sometimes a lender might "hide" a fee (this was a big problem about 15 years ago) so the APR showed you a number that included the fees. All loans have an APR: car loans, credit cards, etc. Being a full point higher to me means that you are paying "points" somewhere. Now, I can't see everything in a setting like this but ask for a "fee worksheet" or a "loan estimate" and that will give you a breakdown of the charges to get the loan. I would certainly lean on the lender to explain all of those fees...and then rely on your instincts with their explanation. If you feel comfortable when working with them, then continue to do so. If you want to compare, then go to another lender and ask them for a breakdown too. It doesn't ALWAYS come down to the rate when working with lenders. Especially with some of the transactions that we do as investors. So, make sure you are working with someone that came as a referral and that usually helps some. You can certainly read this big post on how to find good lenders HERE if you would like. Admittedly, that's more for the BRRRR method and house hacking is a lot more straight forward but some of the questions there still might help.

Anyways, hope all of that makes sense. Thanks!

Thanks Andrew good to know! I just requested a fee worksheet from my lender so will see what that includes. Also read through your post on lenders which was very informative, so thanks for the link!

1 Vote

Boston, Massachusetts

Hey Everyone! In the process of buying my first house & trying to make a house hack work in the Boston area.

My question is pretty simple -- when I run analysis through the BP Calculator and I enter the Interest Rate, should I be entering actual Interest Rate or APR? I've asked my lender for his interest rate estimate a few times to keep my projections correct but when he draws up an offer letter for me the APR is around a full percentage point higher than the rate estimate he gave me, although the estimate is always in line with the actual interest rate on the offer sheet.

Obviously a full percentage point makes a huge difference in how the analysis looks. My understanding is that the APR is the actual rate I will be paying for the life of the loan and includes fees from the lender. But does the BP calculator already take into account these fees? Also, is a full percentage point higher for APR vs interest rate a normal amount or should I be looking at other lenders? (Mortgage is an FHA)

Would love to hear some thoughts on this.

Thanks!!

0 Votes

Boston, Massachusetts

Hey Everyone,

Working on my first house hack and I'm using a spreadsheet someone on the forums was kind enough to give me to project income & expenses. It's been a massive help but the one thing I can't figure out is how to find my breakeven point so that I'm not negative cash flowing right away. Basically what I'm looking for is a formula that tells me what purchase price would get me to net positive based on my other inputs.

I have the monthly amount that I'm losing, so what I believe I need to do is lower the monthly mortgage payment by that amount and then back that out to the purchase price that would get me there. My math skills aren't what they used to be and I might be trying to do wayyy too much here but it seems like it should be more simple.

Here's an example

Mortgage Pmt: 5,435

Monthly Loss: 1,922

Breakeven Mortgage Pmt: 3,512

Mortgage Pmt Formula (In Excel): -PMT(Int Rate/12, Mortgage term * 12, Loan amt)

If anyone is a true excel/math whiz and can give me some help here I would really appreciate it!!!

Not sure how to attach a spreadsheet to this but if someone is willing to help I'd be more than happy to send it over

0 Votes

Boston, Massachusetts

All Forum Posts by: Ryan Butler

Ryan Butler has started 2 posts and replied 4 times.

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Ryan Butler has started 2 posts and replied 4 times.

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Post: Interest Rate vs APR

Post: Interest Rate vs APR

Post: Calculating Breakeven Point - Anyone good with excel/math pls help!