Risks: rates go down and you have to pay a prepay of 2 or 3 %; you have to sell and pay the prepay; rents decline & you can't make the payment like any other type of loan; cost upfront a little more than conventional; need to find experienced broker licensed in the state where subject property sits; servicers are bulldogs. 

The total cost for this monthly for me is $1.00 fee for online payment for Sevier County, TN and the .73 cent stamp for Blount County, TN.

I use a spreadsheet I developed to determine my entry costs, carrying costs, cash flow, tax write offs, appreciation and exit costs.

Past success is a good indicator of future performance. understand the risk if the project takes longer or costs more.

Another note on construction cost, going vertical is very expensive now and would require have a great connect with a developer and a builder in the area.See what rents are in the area and run the numbers to ensure the rents will cover your costs and give you a solid return—using the 1% rule can help.

If you are worried about out of pocket costs, see if maybe a rehab loan is an option to get everything needed done now and refinance in 3 months when everything is complete.

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

How about the increased home insurance cost for a landlord policy?

If I can make a suggestion...Yes with 3 points you might be able to get into the 6's - but let me give a quick example:Let's say loan amount is $250k and making some other assumptions, paying 3 points down would cost $7,500 however that might only save $195/mo. 

The only approach I’ve found effective is offering a deposit alternative, which lowers upfront costs for tenants without devaluing your property.