Longer loan term with better cash flow or shorter loan term?

[Connor McGinnis]

I am looking to buy an apartment complex in the greater New Orleans area. I am from the Midwest where cap rates are high and you can have positive cash flow with 10-15 year loans. In New Orleans area, cap rates can be between 6-8%. To make these deals work, it seems like you have to take out a longer term loan like 25-30 years.

You have to pay such a significant more in interest over time with these long term loans. Is this what you have to deal with when investing in this type of market?

I am also 100% financing which makes this even worse. I have a family investor that I will borrow from for the down payment, then finance the rest from the bank.

Since I have to do 25 year minimum terms to make a deal work here, is that worth it and is that the norm for these types of markets? My realtor tells me this is normal but it seems very risky to do. It seems like investors strongly bet on appreciation here which I dislike.

Any insights here would be very helpful. I am currently negotiating on a 12 unit deal and am struggling to make the numbers make sense.