Financing Considerations in Deal Analysis
When analyzing a deal and valuing a property, what financing terms do you include? As many of you already know, a deal can look very good to very bad to anywhere in between based on the down payment, interest rate, and loan term that is used. Is there a standard set of financing terms that should be assumed in deal analysis regardless of the actual mortgage terms that will be used...say a 30-year fixed rate mortgage at the prevailing non-owner-occupied interest rate and 20% down?
Let me explain why I am asking this. I am currently assessing house hacking opportunities that I would finance under an FHA loan with its associated interest rate and minimum down payment. Simple math dictates that such a low down payment will result in an acceptable cash-on-cash return for even the most razor-thin positive cash flows. However, the same deal might be undesirable once I have 20% equity. If I intend to re-finance into a non-owner-occupied traditional mortgage after some time, should I then analyze the deal with the aforementioned standard financing terms?
As a side question, what return criteria do you look for in a deal (cash-on-cash return, return-on-equity, etc.)?