Commercial mortgages NC

9 Replies

@Terrance Clark Can you explain the details on the type of asset that you are trying to take down? This would help in knowing what type of broker you would need to be referred to. Glad to help if I am able.

@Terrance Clark My question would be why would you want to pay this size of a deal off? Why not just re-fi out and keep safely leveraging as much as possible and you would still be cash flowing (if purchased/managed correctly). I know this comes down to your specific goals/stragety, just wanted to get your thoughts.

We are trying to run very lean until we have 500k a month in cash flow. Until we really want to leverage credit. Being lean allows us to be picky about the tenants we allow in the property.

Originally posted by @Terrance Clark :

We are trying to run very lean until we have 500k a month in cash flow. Until we really want to leverage credit. Being lean allows us to be picky about the tenants we allow in the property.

The purpose of the pre-payment penalty is to keep the interest rate lower.  Without the prepay, the rate will be adjusted and your desire to "run very lean" will be mitigated.  Interest rates are low right now.  Lock in for as long as you can.  If you get a loan with a 3 year prepay, be happy because when it's time to refinance, the rate will be substantially higher.

I will call around to find the best option I know there are banks that will allow you to pay off huge chunks at a time with no penalty. Its so much better not having a mortgage you can be very picky about your renters get the most high quality tenants, people who will take care of the property. Mix high quality rentals with a flipping strategy and boom you have a business that will pay you in many different aspects

@Terrance Clark

Not having a mortgage might feel great on your primary residence once your ready to retire and live on savings or passive income but I'm feeling similar to @Curtis Rouse.  

I'm having a hard time understanding how the benefits of being able to hand select tenants out weights the benefits of having hundreds of thousands of dollars available to you and not locked up as equity.  Not to mention interest paid on your mortgage is tax deductible. (another benefit of leverage)

Even if that was the most important thing, how is it actually accomplished by not having a mortgage?  Most people managing 160 units are more worried about keeping that occupancy rate as high as possible.  If you had 160 units fully occupied with low turnover I think people would have to wonder if your charging enough in rent.  

Not trying to criticize AT ALL.  I just wanted to understand this strategy more clearly..

I’m in an area where it is majority a renters market. This property also has many amenities, the property is already at 100% occupancy (which certainly says rent is low) none the less on the low end it’s a cash flow of 100k. Hand picking your tenants is cost effective in terms of upkeep. Lastly with expecting tenant turnover we can implement our flipping strategy where we know what our tenants can afford, and what they like hopefully helping the time it takes to turn our flips.

There are other ways and other tax breaks we take advantage of, mortgages are not really what we are interested in right now. We have properties that are mortgaged but hoping to become mortgage free in 24-36 months build stronger cash flow and go into better mortgages in better equity positions in the future