We run a debt fund, so our focus last few years has been buying defaulted debt and doing some PML.

:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

@Rahul Sivaswamy if you use the BP Rental Calculator, it defaults to 5% Vacancy, 10% PM, 10% Maintenance, etc.These are all pretty good estimates, except the Vacancy factor of 5%.

Ensure all terms are clearly outlined in the loan agreement, including repayment schedules, interest rates, default clauses, and any exit strategies.

Usually, you're comparing your 401k portfolio returns (which are usually in a default target date fund) vs SPY. 

@AJ WongWe invest in defaulted mortgages and are very selective where we invest - one no go for us is typically flood zones.

:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

The benefit of using DSCR style loans is that they typically do not appear on personal credit reports (unless there is a default).

If you're leveraged and tenants can no longer pay rent, you may end up having to liquidate, foreclosure, default, etc. and could lose the cflow and take a hit on the asset values as well. 

If you want to be taxed as a disregarded entity (the default for single-member LLCs), filing this form informs the IRS of the change.