Hi Prospects & Friends,
I went by to see this foreclosure last Saturday. The house is nice in size being it is 4,654 sq.ft. & listed for $209,900. The only thing I don't like about it, is the color & design style, other than that the house is perfect, because all the #'s work. I'm on a destiny to find myself a foreclosure to fix up & live in for myself that has an elegant style & rich in taste, as well as priced right & #'s work in my equation like this house. What I mean by #'s is calculating the taxes, maintenance fees, & insurance to estimate what my p&i mortgage payment/sales price should be. See example below based on this foreclosure:
Yearly Taxes- $7,810
Annual Maintenance- $400
Proposed Yearly Insurance- $3,300
Monthly Totals- $959.16 (Taxes, maintenance fees, insurance)
Monthly rents in this subdivision are going for .52/sq.ft. So this house is @ $2420.08
Mortgage p&i payment for this foreclosure only should be no more than $1,460.92/mth., based on my analysis.
CMA Value- $73.92/sq.ft (this foreclosure's value is really worth $344,000, based on CMA in last 6 months for this subdivision)
A interest rate will make or break your situation, so let's compare 6% & 8% interest rates on my example & investment analysis equation.
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Listing Price $209,900
Interest Rate 6%
Down Payment 20%
Allowed Maximum p&i $1,460.92, expenses $959.16
.52/sq.ft. say value should be at $244,000 ($1460.92/6.00x1000)
So in this case with 6% interest your p&i is $1,007.52 which is less than the $1,460.92 I said was your maximum amount you shouldn't go over with p&i mortgage payment, add this to $959.16 & your safe @ $1,966.68, which is less than $2,420.08. #'s work @ 6% interest & in this case prospect can settle at list price of $209,900 or lower if want.
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List Price $209,900
Interest Rate 8%
Down Payment 20%
Allowed maximum p&i $1,460.92, expenses $959.16
.52/sq.ft. say value should be at $199,000 ($1460.92/7.34x1000)
So in this case with 8% interest your p&i is $1,232.53 which is less than $1,460.92 I said was your maximum amount you shouldn't go over with p&i payment, add this to $959.16 & your safe at $2,191,69, which is less than $2,420.08, but CAUTION your .52/sq.ft. says you shouldn't be paying more than $199,000 for this house!
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So conclusion is the 6% & 8% interest rates both have total monthly payments falling below threshold of $2,420.08, but both have different value analysis based on the .52/sq.ft. investment equation. 6% is safe because it says current list price is ok for this buyer & should be @ $244,000, but 8% says for this buyer list price isn't ok & should be @ $199,000. You don't want to over pay for any property, not even a foreclosure based on your interest rate. So play smart & raise your financial smarts!
I will offer a book about my investment analysis equation I use. Will offer another helpful article soon.
