The home that I am considering would be a vacation home rental/investment in Sevierville, TN. Here in the Smoky Mountains, tourism is a vast commodity averaging over nine million tourists per year. Most will stay in the mountains and rent a chalet. The home located at 3270 Laurel Cove Trail is sitting on 5.17 acres in a cul-sac by itself for privacy. The house has six bedrooms, 5.5 bathrooms, and has a total of 8030 sqft.

The price is a modest $1,999,000. Just beyond my reach so to make this dream real, I must look at financing. The first endeavor is to look at my options:

1) 20% down ($399,800), FRED rate of 3.33% for a 30-years has a payment of $8845 (PITI)

2) 15% down ($299,850), Fred rate of 3.33% for a 30-years has a payment of $10,345(PITI).

3) 20% down (299,850), 2% for 30 years has a payment of $7725 (PITI).

I liked option three. The payment was lower, but the Lifetime payments totaled $2,781,000-ouch! So I decided to try one more option:

4) 20% down ($299,850), 2% for 15 years has a payment of $10.291 (PITI). The Lifetime payments would total $1, 852, 378., a difference of $928,620 huge savings.

In my analysis, it became quite apparent that the interest paid throughout the loan plus the length of the loan were essential factors in the overall cost of my dream home.

Since this cabin is in the same town in which I live, I can take care of the maintenance and renting it on my website. We usually average ten good months of huge reservations on the cabins each year. This size cabin can rent from $271 (off-season)-$1021 (peak-season) per night, With this kind of ROI, the cabin should quickly pay for itself, and I could pay an extra $5000/month during the peak season to shorten the Lifetime payments even more. Once the loan is paid off its pure profit and by then, I should have 3-4 more rentals. All of this sounds great, right? If I only had the down payment.

As far as applying what I have learned to future endeavors, I have learned that it is essential to shop around for the best interest rate and to shorten the duration of the loan for short as possible.

Required:

Provide feedback on the above financing method (even the property). Are there any similarities or differences in the above response compared to your own?