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Answer:

When it comes to purchasing an investment property, there are many misconceptions. A common one is that the investment amount is the same as the down payment. However in reality, these are actually two separate items.

It is true that the cost of a down payment makes up a portion of the total investment amount, but so do many other expenses. These expenses include all of the costs associated with financing – closing costs, acquisition, and loan fees— not to mention the rehab estimate.

Here’s an Example:

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Now, most would assume that the investment amount for this property in Texas is $68,580 (as this amounts to a 20% down payment). That would be incorrect. You have to factor in the additional costs of the rehab estimate, loan fees and costs, acquisition fee, and closing costs to get the total investment amount of $97,710.

 

“Once you’ve factored in these necessary expenses, it’s easy to see why the total investment price for your new property will never equal the down payment,” says Tobin Brinker, HomeUnion’s director of acquisitions. “It’s also why it’s important to set a realistic budget for yourself. Otherwise, you’ll be unhappy with your ROI, as it will be much lower than you originally planned for.”

To best prepare investors, our Investor Portal has a full breakdown of the Total Investment Amount for every property on our platform. This helpful approach gives you a more accurate idea of what your expenses and returns will look like. In fact, it’s all part of HomeUnion’s philosophy that (in the spirit of full-transparency) gives investors all the information they need to achieve their financial goals.

Meet the Expert

Tobin Brinker currently serves as HomeUnion’s director of acquisitions, a position he earned after executing many successful investment strategies for our investors. Brinker’s business acumen and skill-set have proven to be an invaluable resource for HomeUnion.

 

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2 Comments

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gul muhammad Nov 22 2016 - 5:20 AM
Good coments
    Alisha Chocha Nov 22 2016 - 9:04 AM
    Glad to hear it. Thanks, Gul! - Alisha at HomeUnion

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