Hawaii | Home Loan | Mortgage | Refinance

Archive for November, 2009

In today’s tough economy business are being promised money saving opportunities at every turn. They are being overloaded with the promise of less over head cost or the chance to reduce their everyday expenses.

Businesses do have some options to help get them through this rough economy. First of all the business in question can renegotiate with their suppliers and venders, the company can cut out everything except for the things that keep their place running. Another step that can be taken by a struggling business is to layoff some of its workers. Although this is not ideal you have to act before you sink or fail altogether. Businesses also have the option of outsourcing some of the work they need done in order to save some money.

This is all being done even though lenders and banks are making it more and more difficult for anyone to get a line of credit. In today’s world it is very difficult to get a line of credit to keep your business going much less build a new one. Some banks and lenders have even closed some lines of credit altogether. However there is the option of Refinancing.

The majority of people get a loan and only think of refinancing when they are aware of a increase in the loan or if they are having trouble and about to default. What happens is that business owners generally don’t rethink their loan as long as they are on time making their payments, they don’t want to deal with the hassle of approaching a bank or lender to look into refinancing. Since the process of refinancing or any loan really is stressful and long many don’t want to go through with it so they can avoid the headache.

The problem with not refinancing until you are in need is that it will much more difficult to find a lender or bank that will be willing to do business with a struggling business owner. Another reason being that once you refinance you will have better terms in with the new loan and can save hundreds of dollars a month. If you wait to refinance your losing out on tons of possible savings that can be used to improve your business and stay alive through and past this rough economic state.

A great way to avoid a possible increase in your monthly payments is to refinance. So if you are expecting an increase from your lender you can avoid it by refinancing on the loan instead.

Running a successful business includes always keeping your eyes and ears open for new money saving opportunities. These days’ lenders are looking for customers so they can grow, now is the best time to refinance your business loan than ever before. When talking about refinancing it is not limited to your business or home loan it also includes any lease or loans that you have on other equipment that you use to run your business.

Example:

For example if 18 months ago you bought equipment for your business with a loan and lets say that the loan was for $80,000 at 8% interest rate over the next five years. If you were then to refinance that same loan at 7% for the same five years you can potentially save $500 a month. Once you have refinance and start seeing the money you are saving you can use it to keep your business running and even expand if your business if you wanted. You can also use the savings to reduce your debt and avoid any layoffs of any of your employees etc.

Although there is not solid answer to save your business, if you refinance and save money at every possible chance you can stay afloat in this tough economy. Cutting your businesses costs, consolidating your debt and getting more out of your customers you can save your business and survive this economic struggle.

At my site I will teach you how to properly refinance or modify a home mortgage saving you thousands of dollars, or even your home. A lot of Greedy Mortgage Lenders will try to suck you dry if you let them. Learn the right way to refinance or modify your home loan at my site: http://www.refinancingcondo.com

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The Cash-on-Cash Return is a measure of an income producing property’s interest rate return on invested equity. The ratio is derived by taking the annual net cash flow (i.e., the cash flow available to the investors) divided by the equity invested.

Cash-on-Cash Return = Net Cash Flow / Invested Equity

There are four types of cash-on-cash return: Leveraged, Unleveraged, Before Tax and After Tax. Consider the following examples:

Example 1: Suppose an investor purchases a property for $10,000,000 with an equity investment of 25% – $2,500,000. At the end of the first year, the available cash to be distributed to the investor is $200,000. The leveraged, before tax cash-on-cash return would be:

$200,000 / $2,500,000 = 0.08% x 100 = 8.00%

Example 2: Let’s assume the investor has a federal and state tax rate of 25%. Then, the leveraged, after tax cash-on-cash return would be:

$200,000 x 25% = $50,000

$200,000 – $50,000 = $150,000

$150,000 / $2,500,000 = 0.06% x 100 = 6.00%

Example 3: Alternatively, the investor purchased a property with all-cash for $10,000,000. Since there are no loan obligations, the investor is entitled to all of the net cash flow available. Assuming the property has a net cash flow of $740,000 then the unleveraged, before tax cash-on-cash return would be:

$740,000 / $10,000,000 = 0.074% x 100 = 7.40%

Example 4: Again, let’s assume the investor has a federal and state tax rate of 25%. Then, the unleveraged, after tax cash-on-cash return would be:

$740,000 x 25% = $185,000

$740,000 – $185,000 = $555,000

$555,000 / $10,000,000 = 0.0555% x 100 = 5.55%

Similar to a cap rate, the cash-on-cash return is a simple metric an investor can use to evaluate the potential return of a property (i.e. “risk”) versus an alternate investment such as a US Treasury Bond. It is a reliable tool for stabilized properties but does have several short comings an investor should consider.

Shortcoming #1: Cash-on-cash is most reliable in the first year than in the future years. This is due to the immediacy of the income. Most property buyers try hard to accurately reflect a property’s first year of operations in their pro forma. However, the projections for the following years are all subject to the buyer’s assumptions. Those assumptions can prove wildly incorrect.

Shortcoming #2: Cash-on-cash can be manipulated by the property’s performance both good and bad. A property that is forecast to operate at 93% occupancy but is operating at 95% occupancy may produce a higher cash-on-cash return for the investor. Alternatively, the same property could be at 92% occupancy and the owner may choose to defer certain maintenance items to maintain his cash on cash. In this scenario, the cash-on-cash return may be what was projected but it comes at a future cost as deferred maintenance will need to be performed sometime.

Shortcoming #3: Returns are increased by interest only mortgages. Since a principal payment does not need to be made there is more cash flow available to the investor. This will provide higher cash payments but will reduce the sale proceeds at the end as a greater amount of principal will need to be prepaid

Shortcoming #4: It does not take into account property appreciation. Some investors may opt for lower cash-on-cash returns to invest in a property that has a greater chance of appreciation than purchasing a property with stabilized cash-on-cash returns but little to no appreciation.

Shortcoming #5: The less equity into the property, the higher the cash-on-cash returns. It stands to reason that the less equity used to purchase an asset the greater the returns to the investor. Some may argue this is not a shortcoming. However, consider that by putting less equity into a property up front it increases the risk to the investor when it comes time to refinance or sell especially if the property has had little appreciation or has experience depreciation. If you are tempted to do this make sure that the reward is well worth the risk.

It should be noted that most cash-on-cash returns are quoted before tax. The main reason is that each investor’s tax situation is unique. An investor should use cash-on-cash return as just one of several metrics in evaluating a specific property for purchase.

Apartment Analytics Software, LLC is one of the real estate industry’s leading apartment investment software firms dedicated to providing investors with powerful and easy-to-use analytical tools enabling them to crunch the numbers with ease and make smart investment decisions with total confidence.

www.ApartmentAnalyticsSoftware.com Ph: (800) 853-7255 Email: info@ApartmentAnalyticsSoftware.com

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The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.” Even as lenders have in recent …
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The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.” Even as lenders have in recent …
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LONDON — Britain’s battered mortgage market is slowly recovering but consumer lending remains low as banks and building societies are still reluctant to hand out overdrafts and loans, according to figures released Monday. Bank of England data …
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LONDON — Britain’s battered mortgage market is slowly recovering but consumer lending remains low as banks and building societies are still reluctant to hand out overdrafts and loans, according to figures released Monday. Bank of England data …
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Mortgage rates fall to a record low as new home sales climb. MarketWatch’s Amy Hoak joins the News Hub to discuss whether these developments point to strength ahead for the struggling housing market.
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