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Updated over 7 years ago,
Pros and Cons between 15yr, 20yr, or commercial 5/20- LET'S TALK!
Hey all just looking for a little discussion for my options on getting financing going after my "BRRRR" in Lawrence, Kansas.
I will be able to get all my capital back out of this deal when I refinance here in the near future. I sat down with my lender and we talked about a few options. Technically I could probably pay myself cash and take a loan for $140k instead of $120k but I'm just going to finance the amount to get all my capital back so I end up with ZERO $ in the deal.
I'm leaning towards conventional financing at a 15 or 20 year amortization for the rates. However, a commercial loan will allow me to not have to season my money and can replenish my capital NOW instead of in 60ish days.
20 year- 4.15%
Total Payment is $1000 with PITI
15 Year- 3.875%
Total Payment is $1145 with PITI
5/5 with 20yr Amortization
4.89%. Was started for 8 months interest only and then rolls into the 5yr lock on 20 year am. On our other deal the cap was a rate no more than 7% at the 5 year adjustment.
So the difference is about $150/mo. Being up front that is not going to change my life in any way on a monthly basis right now. We are comfortable but we live well within our means to be in this position. @ScottTrench basically wrote a book about my life lol... where are my royalties?
To shed some light on the Property...
It rents for $1450/mo this year but next year we project we will be renting it for $1650-$1800. So, regardless my projections will put us in a good spot after expenses
What am I missing here on my thoughts? We are pretty conservative people and I put a lot of value in paying down my assets and being in a good place in case things change in our life. I don't want to lose it all and try to rebuild by being over leveraged. I realize there are a lot of preachers of "Leverage until they drop" but that isn't me. I can always leverage the equity at another time but to me the value of security means a lot more. This is not my full time job.
My biggest thought is maybe I'm missing something from a tax advantage standpoint... I'm giving up 5 years of writing off big interest. However... Trump or someone else could always change that anyway. Few things are guaranteed in this life.
Regardless I feel blessed and am in a great spot. This was my very first project... took it on alone... and in my opinion hit a home run. We are going to cash flow $4-700/mo after PITI but before expenses on a SFH with ZERO $ invested. I wish they could all be this way.