CASE STUDY IN REAL ESTATE

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Our client owns and manages four single-family rental homes. He has been in business since 2011. Gross rentals for 2014 were $40,251. The company carries mortgages for two of the four properties and wanted to consolidate outstanding loans and leverage existing equity to purchase a fifth property. Their application was declined by a local bank stating complications collateralizing the loan through existing residential mortgage loans.

GOALS

  1. Consolidate properties into one LLC.
  2. Consolidate outstanding mortgage loans into one commercial line of credit.
  3. Utilize line of credit to purchase a fifth property.

CAPITAL REQUIREMENTS

$75,000 for property purchase, improvements, and working capital.

ACTION PLAN

  • Preparation and submission of tax returns for 2014.
  • Created Executive Summary with a detailed report on Use of Funds.
  • Develop Projections with additional property income.
  • Developed and implemented Debt Service Coverage (DSC) Ratio.
  • Monitor monthly Profit & Loss Statements in accordance with DSC Ratio.
  • Submission of loan package to local banks.

OUTCOME

A commercial line of credit approved for $100,000 at 4.775% with an amortization period of 20 years.

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