Cap rate needed to cash-flow a 15 year note?

Question

As a rule of thumb.  What is the cap rate needed to cash flow a rental home with a 15 year mortgage?

In this example assume 20% down and 4.25% rate.

Account Closed · Answer

I got 7.224% as well. Just Just curious your rationale for 15 year amortization?

Jeff B. · Answer

Cash follow will be impacted by both(eg higher rates will lower CF and higher purchase prices will lower the caprate).  However don't assume that it is possible to even form a 'general rule' that will hold true in all cases.  The primary values are the NOI and the purchase price so work with these to find the numbers that work for you. If you take this approach( magic rule X), you will be missing a great many opportunities.

Thomas Ince · Answer

Some of the properties I'm looking at are higher cap rate, older properties.  Does that affect the term?

I bet I can get a longer term for a newer property.  Has anyone seen this before?

Ralph R. · Answer

@Thomas Ince

I have never used them but there is a lender called Premier Mortgage Capitol that has a program that lends based on the deal, and not so heavily on the borrowers finances. might give them a look see.  their program says a 30 year note.  I don't know about Interest rates

RR

Chase Gochnauer · Answer

I have two banks here that will do commercial loans for 20-25 years. I'm surprised you can't find someone to go out longer. I'd call another bank.

Thomas Ince · Answer

Thanks all for the posts.

Thomas Ince · Answer

I agree with you 100%.  I'm having a hard time finding banks that will lend on the property for over 15 years.  I could if I was purchasing this myself to live in but the bank is keeping this as a portfollio loan.

Wayne Brooks · Answer

Well, at 4.0% the payment is right at .75%/mo. of the loan amount, so about 0.6% of the purchase price, or about 7.2%......for whatever that is worth.  The hardest part is projecting an Accurate NOI.

Cap rate needed to cash-flow a 15 year note?

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