Revere Street Case Study Essay

1722 Words Nov 23rd, 2011 7 Pages
Case Study
Executive Summary

Problem Statement
Edward Alexander a Harvard graduate is looking to invest in a small income producing apartment building in the Back Bay-Beacon Hill area of Boston, Mass. He currently has $80,000 dollars saved up to purchase this property. He began his search for the perfect property checking current listings and prices using, www.bankrate.com and www.realestate.boston.com. Due to many of his friends living in the area he gained access to eNeighborhoods a program that allowed him to enter addresses and it would show the previous 25 properties sold. Most properties observed sold for $700,000 and higher and required an initial equity investment of $150,000. Since he only has $80,000 in equity he plans to
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Harris agreed that the $61,500 annual cash flows would be enough to cover the financing charge of $45,900. The loan officer also needs proof to Alexander’s annual income claim of $48,000 per year and credit references. Alexander would be signing the note personally, making him personally liable for the loan, reducing the bank’s risk. Legal and title expenses at closing are expected to cost $2,000, certifying ownership and assuring there are no liens on the property. Harris mentioned to Alexander that he would need $1,500 for his own attorney and $4,500 for a 1% loan organization fee payable at closing. After hearing the mortgage offers, Alexander consulted his family attorney, Josh Guberman. Alexander’s primary concern was the fact that he would be personally liable with the second offer. Guberman said this was unique to small mortgage loans only in Massachusetts. Alexander also inquired how much risk he would be taking in making an offer without having his financing secured. Guberman explained that Alexander could submit a written offer on the property while still weighing his mortgage options. If said offer was accepted, Alexander’s sales deposit, normally 5-10% of the purchase price, would be forfeited to the seller. Guberman was concerned whether Alexander had adequate funds, because his total costs exceeded his savings of $80,000 and prospective mortgage of $450,000 by $19,000. Alexander expressed his intent to act as

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