"Banking on returns -- again" Can Someone Explain?

Surprising therealdeal would show such garbage.

How the fantasy works;

Let's assume the bank will finance 80% for you and this ridiculous 3% mortgage the broker is suggesting is likely a 3 year or 5 year or 7 year ARM which will not stay 3% for more than 9/12 months.
And these ARMs are only good in a chronic upswing in equity market, like manhattan enjoyed for just over a decade and not returning anytime soon....or just call it, the flipping market.

So let's take this fantasy 1 bedroom apartment that rents for $4K a month. Let's take the recently sold 25B in his building that went for $1,237,000.
Pop in 20% down in the mortgage calculator, that's a $247,400 down payment and a $989,600 mortgage.
3%(chuckle) on $989,600 is $2474 per month + $861 common charges + $52 taxes (that's forever) = $3387

So $4000 minus $3387 = $613 or $7356 a year "profit".So return on $247,400 plus what, another 25K in closing costs...but let's forget about that) is just under 3% return on your down payment. Of course also assuming some stellar rental tenant as well.

Only retarded trapped in the last decade brokers think this way anymore.....I hope.

I agree. 6% or 7% is a fantasy. Unless they are assuming an annual appreciation in property value.....but still, not very realistic in my opinion.

Actually, I think you have an error in the mortgage payment. $989,600 @3% is $4,172/mo. So total payment os $5,085. Renting for $4K will give a $1,085 loss. This apartment would have to sell $915K just to break even.

989,600 times 3% = 29,688. divided by 12 months is 2477

WestVillage is correct. truth, you're forgetting the principal in your calculation.

989,600 times 3% = 29,688. divided by 12 months is 2477 would be an INTEREST ONLY LOAN, and rates are not at 3% in that scenario