Insurance Agent · Sioux City · Member since 2020 · 83 posts · 41 votes
Looking at a portfolio purchase. 180k purchase price, 20k down, balloon after 5 years. Payments based on 15 year amortization with 6% interest.
My question, at 5 year mark, if the properties appreciate at 4%, I should be able to get $153,000 with 70% LTV. I would have a balloon payment of $123,000. Is that enough spread to be comfortable? I've never done a balloon payment before and it scares the heck out of me.
Who knows what the world will look like in five years? The performance of your particular asset... real estate markets... lending markets... interest rates... general economy...
If you can negotiate a 10-year balloon, you're more likely to be able to ride out any negative periods. But in any instance, negotiate an option to extend the maturity date. Exercising may cost a little money, but it places you in a much safer position.
Who knows what the world will look like in five years? The performance of your particular asset... real estate markets... lending markets... interest rates... general economy...
If you can negotiate a 10-year balloon, you're more likely to be able to ride out any negative periods. But in any instance, negotiate an option to extend the maturity date. Exercising may cost a little money, but it places you in a much safer position.
Thank you! Like that idea, balloon payments stress me out before I even get in a contract for one!