All Forum Posts by: Leo K.

Don't forget maintenance and capex. From my experience your monthly cash flow will be closer to $200/month after you factor in $200 for maintenance & lawn care AND $100/month for reserves.

$2,400 annual cash flow / $38,000 downpayment: 6.3% cash on cash return

I know prices are inflated are Nashville, but you can do better than this deal - my 2 cents.

@Amit Kal @Henry J.

Is your goal to pay off these properties as quickly as possible? Or do you want to continue expanding?

The answer will dictate whether the IO product or 15 year mortgage is best for you.

With interest only payments you'll have zero principal paydown but will have more cash flow to redeploy into another asset. In essence you're exchanging the principal payments for the ability to reinvest that money into another purchase.

Think about it this way - with the mortgage your ROI is 4.5% (cost of debt), BUT if you want to withdraw your own money you have to re-qualify and pay the bank to access your equity. Effectively your ROI is less than 4.5% because it'll cost you money to access your principal.

Now with the IO scenario - can you surpass a 4.5% return if you redirected those principal payments into a new purchase? (I would certainly hope so)

I structured all of my investments at 90% LTV and 24 month IO period. This enables me to buy twice as many properties when compared to a traditional 20% down payment. The debt automatically rolls over into P&I payments at the end of the interest only period and has a 5 year balloon amortized over 20 years (there are banks that will amortize 25 years, I've spoken with one that will even LOCK the rate for 20 years for a small premium). You definitely have options in the world of commercial lending.

One successful investor told me "leverage until you begin losing sleep" - Ie. There's no right or wrong way to finance your investments as long as you cash flow. The AMOUNT of your cash flow however will depend on how aggressively you structure your debt.

@Amit Kal

The 24 month IO period is nice but the 15 year am will kill your cash flow once you begin paying P&I. Plus you can get a 75% LTV loan by going with a conventional mortgage and double your cash flow since you're amortizing over 30 years instead of 15 (interest rate will be 4.5-4.75%). Your initial cash outlay will be identical since you're putting 25% down - hence your cash on cash return will look much better with the 30 year mortgage.

If your goal is to maximize immediate cash flow there are several local banks that will offer a 24 month IO period AND 25 year am (fixed 5 yrs).

If you're looking for a stable long term product - a conventional mortgage may be the best play.

Republic Bank - 85% LTV refinance

@Account Closed

The tenant will pay for the surety bond. I don't envision a tenant asking the landlord to obtain a policy as well, but I certainly have no issue doing so.

Is this a practice that you implement? If so, is there a bonding company that you would recommend?

Any landlords here that require tenants to obtain a surety bond INSTEAD of a security deposit?

I'd like to collect a "move-in fee" instead of a deposit AND require the tenants to obtain a surety bond (insurance) to ensure that I'm compensated for any lease violations.

SureDeposit offers this sort of coverage however it's only for 100+ unit portfolios.

@Allen Harris 

I have several rentals in Columbia - great area for the money. Feel free to reach out, happy to talk shop.

@Paul D. Farm Bureau TN - by far the best value that I've found for my rentals

@Rhea Jackson 

All of mine are commercial multi families with the exception of one which is conventional with fannie.

@Rhea Jackson @Derek Boone

I've found 3 commercial banks in Nashville that will lend up to 90% LTV for non-owner occupied rentals:

Tristar Bank

Republic Bank

Volunteer State Bank

I like the team at Simmons Bank as well but haven't actually closed a transaction with them as they don't like to lend beyond 85% LTV.

Personally I prefer to have a lower down payment even if it equates to a higher interest rate. I'd rather hold the additional 5% down payment in my pocket and reinvest it into another asset to capture a 15-20% ROI.

If I'm forced to invest a certain sum of money I'd rather inject the capital directly into the asset than trap it with the bank. Improve the property, drive rents, cash out refi down the road and lock in a lower rate at that point. 

At the end of the day your best option depends on your appetite for leverage and investing philosophy.