Andrew Ikeda 0 Report post Posted February 23, 2004 Greetings Fellow 'Naked' Investors, Just thought I'd share this tidbit with you good people The 1% rule is a rule that we at US Funding use to evaluate cashflow and cashflow potential of a subject property. It is a simple rule and saves a ton of time in the evaluation of properties. Here it is: The gross rents have to equal at least 1% of the asking/sales price Example: Duplex for sale, asking price $200,000. Gross rents must then equal $2,000/month $200,000 X .01 = $2,000 This usually covers PITI only and if you can raise the rents or put an 'interest only' or ARM loan on it or both, then you can increase your cashflow. Next, several people have called me with concerns that my loan origination fee is 5%. NOT SO! Please do not misunderstand. I would never close a loan with those kind of fees! In an earlier post, I quoted 5% as a general rule of thumb for ALL CLOSING COSTS! This 5% will also cover the following: The appraisal, recording fees, wiring fees, title fees, escrow fees, lenders fees, doc prep fees, underwriting fees, admin. fees, impounded taxes and insurance, etc, etc, etc and also included in the 5% are our (US Funding's standard) loan origination fee of 1.0 for properties or loan amounts over $100,000 or 1.5% for loans under $100,000. In summary, EVERYTHING you will see on the good faith estimate and HUD 1's. Again, the 5% rule is somewhat high and scares many people but I would rather underpromise and overdeliver than to have it visa versa. Borrowers are very happy with me when they sit at the table at closing and find out that they dont have to pay as much. (I've had two borrowers tell me that their loan officers only calculated principle and interest and forget or leave out the taxes and insurance, which were impounded without their knowledge and consent. ) OUCH! FYI: impound is when the lender or you or both agree to have your taxes and insurance paid monthly to the escrow officer or lender and they then disperse and pay your taxes and insurance for you. You make one payment and they break it up and pay all the 'other stuff' for you. Ok, enough for now. Soon, I will write more about ARM's and 'interest only' type loans and why ALL investors should use them, and also clear up some misconceptions about ARM's. Ya'll have a great week and happy investing!! Andrew (Mortgage/Investment Specialist) US Funding Group, Inc. 888-889-1640 ext 220 andrew.ikeda@usfundinggrp.com and/or andikeda@netscape.net Share this post Link to post Share on other sites
MichaelC 160 Report post Posted February 24, 2004 Andrew, thank you. We always appreciate your in depth posts and information about various financing matters.Soon, I will write more about ARM's and 'interest only' type loans and why ALL investors should use them, and also clear up some misconceptions about ARM's.Good. I'll be looking forward to it . Share this post Link to post Share on other sites
option8 0 Report post Posted February 24, 2004 This is good stuff, Andrew and I echo Michael's comments. Your posts contain valuable information on the financing end of the properties. Just another reason why I love this community! option8 Share this post Link to post Share on other sites
gregzilla 0 Report post Posted February 25, 2004 Andrew, I look forward to your post about "ARM's and 'interest only' type loans and why ALL investors should use them". I've only recently learned what they are and I want to learn as much about them as I can. Greg Share this post Link to post Share on other sites
