The Financing Assumptions Tab is where you select between a Cash Transaction and a Short-Term Rehab/Construction Loan. This tutorial will break down how to enter your short-term real estate financing scenarios, whether you're doing a rehab or new construction!
Financing Inputs Tutorial
*Be sure to click the rectangular "Full Screen" button in bottom right corner of video!
Short term financing assumptions for your deal should be used in scenarios where you are the end buyer. Typically in a real estate deal that you buy, rehab and flip or buy, rehab and rent, you're going to get a rehab/renovation loan (or a construction loan) to buy and renovate the property. This will be a short-term loan which is almost always an interest-only loan. These loans will typically have a 6, 12 or sometimes a 24 month timeline after which you must pay them off by selling the property or by refinancing.
The idea is that while you're renovating and taking construction draws, you want to keep your cash outflows to a minimum. So an interest-only loan allows you to keep your payments down when the property is not bringing in any income.
The other reason why these are interest-only loans typically is because you will actually be adding to the loan as you take each "rehab draw" so it does not make sense to amortize a loan (pay it down) while at the same time increasing your principal loan balance.
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