Amortizatin Of Discount Or Premium In Cash Flow Statement Closing Costs When Buying a Multi-Family Apartment Building

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Closing Costs When Buying a Multi-Family Apartment Building

When purchasing a multi-family building as an investment property, closing costs can add up significantly and thus should be calculated carefully as the investor must estimate whether they have sufficient funds for the down payment and early closing costs. To close the contract.

It’s also important to estimate how much cash you’ll need to set aside for closing costs before closing because one of the bank’s conditions when approving a mortgage is to make sure the buyer has enough funds for the down payment and closing costs.

Assessment Fee: This requirement helps the bank assess the market value of the property, so that it can estimate the LTV (loan-to-value). If the appraised value is $500,000 and the LTV is 80%, the bank is willing to lend $400,000 of the total appraised value. An appraisal fee is usually required with insured mortgages, but for conventional mortgages, it can sometimes be waived at the discretion of the bank providing the mortgage. Assessment fees depend on the size of multi-family buildings and other factors. Assessment is directly related to the size of the building: the larger the building, the higher the assessment fee.

Phase 1 Environmental Charges: An environmental analysis of the property and all surrounding uses or conditions to ensure that the property and its surroundings are not contaminated by past use of chemicals, oil tanks and other hazards. Usually these fees are only associated with insured mortgages and not conventional ones.

Inspection Fee: The inspection fee includes a careful inspection of each unit in the building to ensure that there are no structural problems in any of the units and in the building. Inspections should only be done by a professional, as problems he misses can cost you a lot of money in repairs later. The more units to be inspected, the higher the fee charged by the inspector.

Land Transfer Tax (LTT): These fees depend on the county in which the multi-family building is purchased. Specifically, if the property is purchased in Toronto, the land transfer tax must include the Ontario LTT and the Toronto LTT.

Legal Fees and Title Search and Delivery: Every transfer should be legally reviewed by an attorney. Attorneys are responsible for conducting various searches such as completing transfer of deeds, preparing mortgages and title searches.

Land Survey Fee or Title Insurance Fee: A recent survey of the property is usually a requirement of the lender. If not available, title insurance can replace it.

Mortgage Application and Processing Fees: The total fee depends on whether the mortgage is insured or not. If the mortgage is insured, the investor pays both the insurance company (CMHC or GE) and the lender. CMHC charges processing fees and mortgage insurance premiums that depend on the loan being made and the amortization period. On top of that, every lender also charges an application fee. The application fee of the lender depends on the institution from which the money is being disbursed.

Reserve Fund: In the first two years (before any cash is accrued) the reserve fund should be added/replaced to closing costs to ensure there is enough money to spend if “big ticket items” need to be fixed, such as a leaky roof, furnace stops working, etc.

It is very important that you research different professionals before deciding which one to go with. Your considerations when choosing should include price, reputation and performance.

Finally, the total amount spent on closing costs can start at 2.5% of the purchase price and go up to a much higher amount depending on various factors such as the amount put into a reserve fund, the province you choose to buy your investment property. In, etc

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