Trump Inked a Terrible Deal on $18.5 Million Home in 2018
U.S. President Donald Trump bought an oceanfront mansion steps aways from his Mar-a-Lago property in Palm Beach, Florida and took out a 30-year mortgage carrying an interest rate of 4.5% according to financial disclosures made public on Thursday by the Office of Government Ethics and reported by Reuters.
The property was immediately put on the market for a whopping monthly rent of $81,250 a month and has been sitting empty on the rental market for 357 days.
Was this a good real estate investment for Trump and his team? Well let’s see…
Let’s Look at the Numbers First
Purchase Price: $18.5 Million
Down Payment: $7.3 Million (39.46%)
Loan Amount: $11.2 Million
Monthly Mortgage Payment (Principal & Interest Only): $56,758
Good Rental Investment? Nope
Assuming they can rent it out at the asking price of $81,250, they’d be making gross rental income of $12,073 (rental income minus mortgage P+I payment, not including other maintenance, property tax, and insurance costs).
However, it’s been sitting empty for nearly a year! Doesn’t sound like a good deal to us.
In addition, they seem to be renting it out at a “discount” according to what Zillow believes the property commands: $104k /mo.
How about the deal on the mortgage? Maybe
Last year, we experienced a interest-rate rising mortgage market, and Trump’s team was probably caught in the midst of negotiating a mortgage deal with some headwind against them.
Freddie Mac shows the following average mortgage rates in May if 2018:
Week ending on May 3rd: 4.55%
Week ending on May 10: 4.55%
Week ending on May 17: 4.61%
Week ending on May 24: 4.66%
Week ending on May 31: 4.56%
Considering the weekly averages from FreddieMac are all above the 4.5% interest rate he inked, it definitely seems like somewhat of a better-than-market deal.
However, not knowing closing costs and other variables, AND considering this is a big purchase with a jumbo loan by a (presumably) well qualified buyer, he could have gotten a MUCH BETTER DEAL.
A good investment in terms of Property Value? Not a good deal either!
Zillow estimates the property value at $19.9 Million in May 2018. Since he bought it at $18.5 Million, you could say he got a deal. After all, he was buying from his older sister, the previous owner of the house. Family friendly deal? or did he simply take advantage of his aging sister? We’d never know.
Even it was a good deal at the time, Zillow estimated value a year later is $16.1 M, representing a loss in property value of $3.8 M (-19.1%) and of his initial investment of $2.4M (-13%).
Not a good deal either!
A beautiful property? For sure!
Considering Mr Trump wrote the book on deal making (The Art of the Deal), his team does not seem to have done a good job on this purchase.
But since you now know this is a GREAT deal for anyone to rent, check out what you’ll get for a mere $81,250 /mo:
Morning strolls on the beach? Check!
Palatial feel and curb appeal? Check and check!
Cozy and inviting pool with expansive views of the ocean? You bet.
Elegant furniture? Included!
Gorgeous views from many rooms in the house? Guaranteed.
Want to rent? Inquire here.
Rather buy a reasonably priced home AND find a great mortgage deal? We got you covered! Start here.
Disclaimer from the author: this is not an advertisement, nor proper journalism or investment assessment. More of a commentary/opinion piece for fun.
Sources
Zillow: https://www.zillow.com/homedetails/1125-S-Ocean-Blvd-Palm-Beach-FL-33480/46846826_zpid/?fullpage=true
Reuters: https://www.reuters.com/article/us-usa-trump-financials/trump-took-out-30-year-loan-on-185-million-home-in-2018-idUSKCN1SM2AY
CreativeCommons: “Donald J. Trump” by Nathan Congleton is licensed under CC BY-NC-SA 2.0 https://ccsearch.creativecommons.org/photos/940352eb-ea10-46e5-8e1f-44e9cad40726
FreddieMac: http://www.freddiemac.com/pmms/
Bankrate Mortgage Payment Calculator: https://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
Sources