All Forum Posts by: P W

I am a beginner when it comes to buying real estate. Like I said, it is my first deal. I have a great understanding of the concepts, but I have little hands on experience. I've never applied for a commercial loan before, so I have no idea how easy or hard it will be to get good terms.

I don't want to pay 1% cash to a broker to save me half a percent interest. On the other hand, if the broker's commission will get rolled into the loan principle and using the broker means the difference between getting 90% LTV vs. 70% LTV, then it will be well worth it to me.

I am very interested to know how the more experienced investors here acquire their financing. Any and all help is appreciated. :D

I mean finance broker. He called me and so I went and met with him. I tried to understand exactly what he would do for me. As I understand it, he basically applies for loans on my behalf and presents my situation favorably to the lenders.

That seems like it would be very helpful, although paying him $10-20k for such a task seems very generous. I assume his commission would come out of the loan principal and not as cash out of my pocket? If that's the case, it seems a bit more reasonable.

But do I really need him to get good financing? Or would it just be lazy and naive of me to hire him?

I'm about to make an offer on my first RE deal. It is a $1m+ commercial property.

Should I use a broker or just apply for financing myself? What would a broker do for me anyway?

The broker I talked to said he usually charges about 1% of the property price.

I believe the equity calculations are off though, as I forgot to include the $10k downpayments as equity.

I suppose the key to this exponential growth, though, is using as much of other peoples' money as possible. I'm curious to hear from you guys how realistic you think those numbers are.

Now how about if you take that $20k/year in down payments and instead buy two properties per year with just 10k down each. Also, pull out all of your equity each year and buy more houses.

Let's also assume you're good at cutting corners, so expenses are only $335/mo instead of $500/mo. Payments will be $465, so that's $200 cash flow.

year1:
2 houses, worth total $200k.
$4800 cash flow
$11,160 equity

year2:
2 year1 houses, worth total $200k
3 year2 houses, worth total $300k
total = 5 houses
equity = $11,160 - $10,000 (downpayment for 5th house) + $27,900 (equity earned on 5 houses in year 2) = $29,060
cash = $4800 + $12,000 = $16,800

year3:
2 year1 houses = $200k
3 year2 houses = $300k
6 year3 houses = $600k
total = 11 houses
equity = $29,060 - $30,000 + $61,380 = $60,440
cash = $16,800 - $10,000 + $26,400 = $33,200

year4:
...
11 new houses = $1,100k
total = 22 houses
equity = $60,440 - $60,000 + $122,760 = $123,200
cash = $33,200 - $30,000 + $52,800 = $56,000

year5:
19 new houses == $1,900k
total = 41 houses
equity = $123,200 - $120,000 + $228,780 = $231,980
cash = $56,000 - $50,000 + $98,400 = $104,400

year6:
35 new houses == $3,500k
total = 76 houses
equity = $231,980 - $230,000 + $424,080 = $426,060
cash = $104,400 - $100,000 + $182,400 = $186,800

year7:
62 new houses = $6,200k
138 total houses
equity = $426,060 - $420,000 + $770,040 = $776,100
cash = $186,800 - $180,000 + $331,200 = $338,000

year8:
112 new houses = $11,200k
250 total houses = $25,000k
equity = $776,100 - $770,000 + $1,395,000 = $1,401,100
cash = $338,000 - $330,000 + $600,000 = $608,000

year9:
202 new houses = $20,200k
452 total houses = $45,200k
equity = $1,401,100 - $1,400,000 + $2,522,160 = $2,523,260
cash = $608,000 - $600,000 + $1,084,800 = $1,092,800

year10:
363 new houses = $36,300k
815 total houses = $81,500k
equity = $2,523,260 - $2,520,000 + $4,547,700 = $4,550,960
cash = $1,092,800 - $1,090,000 + $1,956,000 = $1,958,800

So after 10 long years, you have ~$6.5 million in equity & cash. You'll also earn an additional $6.5 million equity & cash every year, assuming you keep it at 815 houses. The houses you own are worth $81.5 million, not including appreciation. Not bad for only investing $20k/year.

But... is it feasible?

What if you factor in the income generated from the 10 properties? Surely that will get you closer to $1 million?

Ok, thanks for the answer.

Interesting... So if the banks want to do a massive wealth transfer à la the Great Depression, they can call in all of their 'expired' balloon loans, bankrupt half the country and take possession of half the country's real estate?