A loan sizer determines the maximum loan amount based on critical financial metrics. For example, these metrics include the Net Operating Income (NOI) and the Debt Service Coverage Ratio (DSCR).
The DCR measures the ability of a property's income to cover its debt obligations. It does this by dividing the net operating income by the total debt service.
A soft prepayment penalty typically only applies if the borrower refinances the mortgage. It allows them to sell their home without facing any fees.
An earnout in this context involves a portion of the purchase price being contingent on the future performance of the property. This effectively ties it to predefined financial targets or performance milestones.
The real estate depreciation recapture tax rate is typically capped at 25% for real property.
Common rental property deductions include expenses for mortgage interest, property taxes, maintenance repairs, and depreciation.
The key difference lies in decision-making and liability: GPs are actively involved in managing the partnership's investments and bear unlimited liability.
When transferring property to an LLC, possible tax implications include transfer taxes, capital gains taxes, and a change in property tax liabilities.
One major downside of using an LLC for rental property investments is the initial and ongoing costs associated with establishing and maintaining the company.
