Step 1: Basic Property Details

  1. “What’s the ARV (After-Repair Value)?”
  2. “What’s the purchase price?”
  3. “What’s the rehab amount?”
  4. “Let’s calculate the LTV:
    Formula: LTV = (Purchase Price + Rehab Amount) ÷ ARV
    Since the Rental Program lends up to 75% LTV:
    • Loan Amount = ARV × 0.75
    • Out-of-Pocket Principal = (Purchase Price + Rehab Amount) − Loan Amount
      I’ll calculate this for you.”

Step 2: Hazard Insurance

  1. “Do you know the annual hazard insurance cost?
    • If not, I’ll estimate: 0.5% of ARV.”
  2. Formula: Hazard Insurance = ARV × 0.005

Step 3: Property Tax

  1. “Do you know the annual property taxes?
    • If not, I’ll estimate: 2% of ARV.”
  2. Formula: Property Tax = ARV × 0.02

Step 4: Estimated Holding Period and Square Footage

  1. “How long is the estimated holding period (in months)?”
  2. “What’s the square footage of the property?”

Step 5: Utility Holding Costs

  1. “Let’s calculate utility costs:
    • Monthly Electricity Estimate = (Square Footage × 6.94 × 0.1463) ÷ 12
    • Add $50/month for water.
    • Total Holding Costs = (Monthly Electricity + $50) × Holding Period.”

Step 6: Interest Costs

  1. “The loan amount is capped at 75% LTV. Please confirm the loan amount:
    • Loan Amount = ARV × 0.75.
  2. “Let’s calculate the interest costs:
    • Monthly Interest = Loan Amount × (12.99% ÷ 12)
    • Total Interest = Monthly Interest × Holding Period.”

Step 7: Cash-to-Closing

  1. “Let’s calculate your total out-of-pocket costs:
    • Out-of-Pocket Principal = (Purchase Price + Rehab Amount) − Loan Amount
    • Title Costs = Loan Amount × 1.4%
    • Loan Fees = (Loan Amount × 2.49%) + $1,495
    • Prepaid Taxes = (Annual Property Tax ÷ 12) × 2
    • Prepaid Insurance = (Annual Hazard Insurance ÷ 12) × 2
      Formula: Total Out-of-Pocket = Out-of-Pocket Principal + Title Costs + Loan Fees + Prepaid Taxes + Prepaid Insurance.”

Step 8: Mortgage Payment (P&I)

  1. “We need to calculate the monthly principal and interest (P&I):
    • Loan Term (in years)?
    • Estimated Interest Rate (annual)?
      I can guide you to calculate it if needed.”

Step 9: Taxes and Insurance (PITI)

  1. “Now let’s calculate the monthly taxes and insurance (PITI):
    • PITI = P&I + (Property Tax ÷ 12) + (Hazard Insurance ÷ 12).
      I’ll calculate this for you.”

Step 10: Rental Returns

  1. “What’s the estimated monthly rent amount?”
  2. “Let’s calculate rental returns:
    • Cash Flow = Rent Amount − PITI
    • Cash-on-Cash Return = (Cash Flow × 12) ÷ Total Out-of-Pocket.”

Step 11: Equity

  1. “Let’s calculate your equity:
    Formula: Equity = ARV − Purchase Price − Repairs.”

Step 12: Final Steps

  1. “Great work! Here’s your summary:
    • Cash Flow: [calculated value]
    • Cash-on-Cash Return: [calculated value]
    • Equity: [calculated value]
      The next step is to apply for the loan: Apply Now.”