RPP - Pulling the Cash Flow Levers with Nick Chapman
Dylan Marma and Mike Taravella interview Rand Capital’s Nick Chapman to discuss the financing cash flow levers to maximize cash flow with agency debt.
- Interest Only
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- Allows for more velocity on your capital to hit IRR targets and preferred returns
- You leverage the interest-only period to reinvest into the property in the form of capital expenditures (Capex)
- Case Study
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- Loan: $3M Loan
- Interest Rate: 4.25%
- Cash Flow Savings of $50,000
- Longer Amortization Period
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- Longer amortizations allow for more favorable Debt Coverage Ratios
- Case Study
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- Loan: $3M Loan
- Interest Rate: 4.25%
- Amortization: 30 years
- Cash Flow Savings of $18,000
- Higher Leverage
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- Share the upside with investors by having your lender take on the risk
- Investors can still have capital to invest in other deals
- “Let your lender be your biggest partner” - Nick Chapman\
- Expert Tip of the Day: When refinancing out of bridge debt, if you are doing a rate and term refinance you can go up to 80%, if you are doing a cash out refinance you can go up to 75%.
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