95-100% Financing
Is it smart to finance most or all of the down payment on properties if you can still cash flow enough to make it work and keep your cash for other deals? Seems to be smart and my credit allows me to do so, at times I do interest only loans as well...just wondering if I'm going to regret this one day....and if so, why?
If you are in an appreciating market this may be a good thing to do since in a few years your loan to value ratios will improve and you can continue to borrow. Your net worth will grow more dramatically if you are leveraged.
What you want to avoid is short term loans in a market that may head downward since you may find that you have a loan that is due, but you can't refinance since the value isn't there.
Thanks, these have all been 30 terms, the interest only is for 10 years then the principal kicks in for the remaining 20, no balloon payments are ever due. My thoughts were that in my market area (DC suburb) the prices are going nuts that in 10 years I'm sure to have enough equity to refi or sell and 1031 into something larger.
Just an addendum. When I first started buying properties I made the decision that I wanted to be able to hang on to them indefinitely. All of my institutional financing was 30 year fixed fully amortized. My seller carry-backs were minimum 9 years. Now, I am looking at 90% fixed rate for 7 years that rollover to an adjustable indexed to LIBOR.
Your plan seems sound to me. The exchange part is particularly beneficial.
Good luck and regards,
Ed