Buy and hold finance

[Tony Roddenberry]

I have two buy and hold properties financed at a local bank. Both are 5%Apr set up on a 20 year am with a five year balloon. As a newbie I took what I could get. Is this a good deal or a bad deal? 

I have been running cash on cash and cap rate numbers on a 15 yr mortgage. Is this a good number to use?

[Jerry W.]

@Kyle Jefferson, to be honest I think the bank prefers these types of loans. A short loan carries less risk, and the 5 year ARM to reset the interest rate benefits them more than me. I would prefer a fixed mortgage, but if I pay 20% down and use a 15 year loan, at the end of 5 years I will be down to only 60% left on the purchase price being financed. If rates jump up, in a worst case scenario I can still refinance out to a 20 year and really drop my monthly payment. In some cases I have gotten the seller to finance the 20% down and I give them a second mortgage with a 5 year balloon and interest only payments for 5 years. At the end of 5 years when the 20% down payment balloon comes due I just refinance back to 80% with the bank and it takes me 20 years to pay them off. I don't get that very often but it is nice.