• NOI = $196,080 + $6,240 - $43,368 = $158,952 Step 4: Cash Flow After Mortgage Payment: • Cash flow = NOI - Monthly mortgage payment x 12 • Cash flow = $158,952 - $11,000 x 12 = $31,952 Now as you see the appraised value of this property is $3,020,000. When you refinance, the commercial LTV is less than residential. In this case it's 85% LTV. Which means you will be able to have the mortgage at $2,567,000. As the Original mortgage amount of $2,500,000 x 75% LTV=$1,875,000. After refinance, you will be able to get $692,000 ($2,567,000-$1,875,000). With total closing cost at $730,000, we ended up only left $38,000 at the deal at this point. This is the real example of our purchase, because it is a turn key property (fully renovated property that can produce income right the way), the initial financing is higher down payment, but because of the power of negotiation, we bring down the purchase price from market value $3,020,000 to $2,500,000. As you will learn more about Commercial financing, Canadian Mortgage Housing Corporation (CMHC) has incentive program to encourage investor to invest in highly demanded hosing market. If you are interested, please go to CMHC website or contact me at june.lam@purposedrivenrealty.ca for details on how you can also get start. To calculate the Return on Investment (ROI), we use the formula: ROI = NOI / Total Money Invested × 100% Given: • NOI = $31,952 (After deducted mortgage payment) • Total Money Invested = $38,000 ($730,000 closing cost - refinance money back of $692,000) • ROI = $31,952 / 38,000 x 100% = 84% • plus 15% equity at the property 55
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