Written and professionally reviewed by the Ailon Financing Solutions team
A good test connects the professionals
The lawyer checks rights and contract, the appraiser checks property and value, the tax consultant checks the tax implications, and the bank checks the credit. The financial map connects the answers to one question: how much money is needed, when it is needed and what happens to the flow after the purchase.
Do not advance based on a single number or verbal confirmation. Any discount that affects the ability to complete the transaction should be documented and checked with the authorized party.
Checking the price and total cost
Start with the contract price and add all the known costs:
- Purchase tax according to the classification and rights of the buyer.
- Lawyer, brokerage and appraisals.
- Renovation, furniture and necessary adjustments.
- Case opening, registration and insurance costs.
- Expenses during the period of preparing the property for rent.
- A reserve for an expense that does not appear in the plan.
Purchase cost calculator Center the sections, andPurchase tax calculator Provides an initial estimate according to the steps embedded in it.
Property inspection and appraisals
Appraisals are important not only to estimate a price. The bank may rely on it for the purpose of determining the recognized value for financing. A gap between the contract price and the appraisal may increase the required equity.
In addition, physical condition, compliance with registration, anomalies, accessibility, expected maintenance and characteristics that affect rental or sale are checked. The tests are done by the appropriate professionals.
Checking the source of the money and the payment schedule
Write down each source of money, the amount and when it is available. Distinguish between liquid capital, money contingent on the sale of an asset, credit against an existing asset and a short loan. An uncertain source does not equal available cash.
The payment schedule in the contract should correspond to the date of receiving the financing and the time needed to complete documents, appraisals and guarantees. In contractor transactions or deferred payment, linkage is also checked and the risk that the future financing will be different from the current discount.
Checking rent and current expenses
Expected rent is determined by similar properties and the market situation, but a conservative number is used in the calculation. Deduct rent-free months, maintenance, insurance, repairs and expenses applicable to the owner. If there are additional expenses in the building or property, they enter the model.
Taxation of rental income should be checked separately with a professional. The calculator on the website does not determine personal income tax.
The financing check
Comparison of offers is done for the same amount, the same period and the same discounts. Check initial repayment, projected total cost, exposure to the index and interest rate changes, fees and flexibility for repayment or change in the future.
For an investment apartment, the financing rate ceiling is up to 50%, but the bank may approve less. Even if the amount meets the ceiling, the repayment ratio and personal data can limit the credit.
Exacerbating scenario testing
Run at least one scenario where:
- The rent is lower than expected.
- There is another month without a tenant.
- The maintenance is higher.
- The refund goes up in routes that may change.
- A one-time expense is added.
The important result is not only the yield, but the monthly amount that the investor will have to complete and the reserve that will remain after the transaction.
Decision map before signing
At the end of the inspection, you should have a total price, required capital, sources and deadlines, financing scenario, base flow, strict flow, open questions and conditions that should not be left after signing. If one of the components is unknown, it is marked as a gap and does not receive an optimistic discount.
Move over The investor readiness test and on The real estate investment calculator. To create a personal financing map, you can contactAccompanying the real estate investors of Ailon.
