A new article to help real estate investors and agents understand the Break-even Ratio has been posted on the ProAPOD website entitled “How to Compute Your Investment Property’s Break-Even Ratio”.
The article explains the meaning of the ratio, why lenders use it when they are considering to underwrite a loan for rental income property, and the formula. Here’s an excerpt:
“Anyone who has been around real estate investing for any length of time is undoubtedly familiar with the term, Break-even Ratio, yet may not have a clue what is and why it’s used. So it seemed like a good idea to explain it.
Break-Even Ratio (or BER) is commonly used by lenders when they’re considering to underwrite a loan…”
The article is free to read courtesy of ProAPOD Real Estate Investment Software.
Real estate agents and buyers are often faced with the dilemma of trying to calculate the maximum purchase price a buyer can afford to pay based upon certain buyer criteria.
- The buyers desired cash down payment
- The buyers desired monthly mortgage payment
- The buyers anticipated mortgage rate and terms
For example, let’s say that the buyer has $10,000 cash to put down, can afford to pay $1,200 per month, and would reasonably expect a bank to quote a fully amortized thirty-year loan at 5.9% interest rate.
The solution is fairly straightforward: cash down + loan amount = the maximum purchase price.
Okay, but the challenge is being able to calculate the correct loan amount at an interest rate of 5.9% that will fully amortize at $1,200 per month (principal and interest) for 30 years.
To make it easy for you, we have included a “Maximum Price” calculator in our iCalculator program. You just enter four lines of data to get the result. (Note illustration below).
So You Know
The buyer’s maximum purchase price is just one of over sixty online real estate calculators available in iCalculator. See them all at real estate calculators