Fliperati

I haven’t ever given much thought to the “no money down” approach to real estate investing (perhaps because I’m fortunate enough to have a decent amount of savings), but I was pleasantly surprised by how little cash I will need to close tomorrow.  After evaluating a number of different scenarios with my mortgage broker, we ended up structuring the financing for this property as a plain vanilla 30-year fixed rate mortgage with a 5% down payment.  We looked at interest-only and adjustable rate mortgages, but as an investor planning to hold the property for only a short-period of time, the traditional fixed rate structure made the most sense because it had the lowest up-front costs.  Even better, I was able to get a “seller’s concession” written into the contract where the purchase price is increased by approximately 3% and that increase is then applied toward my closing costs (which is just a convoluted way of borrowing for the out-of-pocket settlement costs).  See a breakdown of the closing costs associated with this property below.

The end result (assuming the closing coordinator doesn’t call a fourth time to change the final figures) is that I will be paying out a total of approximately $16,500 to acquire this property after the closing costs not covered by the seller’s concession and the 5% down payment are tallied up.  That comes out to only 6% of my $285,000 purchase price in cash spent to buy my first house, which is a pretty attractive figure in my opinion.  That percentage goes up a little bit if you include the cost of the property inspection, homeowner’s insurance, and flood insurance, but it’s still less than 7% of the purchase price even with this all-inclusive view.  This leaves me with a bit more cash in my pocket for the renovations and on-going expenses than I had originally budgeted for, so I’m feeling pretty good about the project so far.  They key will be reselling this property on schedule to prevent the hefty carrying costs from eating all my profit away.