As long as there is a spread between the loan rate and the cap rate, go with maximum leverage.
Assume a 10% Cap Rate Park and a 7% loan amount. Pretend it’s a $1,000,000 park.
$1,000,000 10% cap if you pay all Cash, you get $100,000 per year in FREE Cashflow. Or a 10% cash on Cash Return.
If you leverage, You put down $300K. The loan amount is $700K at a 7% interest rate monthly PMT is $4600.
$4600 x 12 = $55,200 annual loan payment. $100K NOI - $55200 Loan pmts = Free Cashflow of $44,500
$44,500/$300,000= 14.8% cash on Cash return. Plus you get the principle paydown, which I know you don’t want to count, but it’s still a nice benefit.
The higher the differential between the Cap rate and the loan rate the better off you will be.
The issue we are currently facing, is cap rates are not increasing as fast as loan rates. Sellers are not willing to come down in price in lockstep with the rise in interest rates (August 2022). So there is an issue with leverage, loan amount, and DSCR. As the Cap rates and Loan rates get closer and closer, a higher downpayment is required. In my local market interest rates have gone up to about 4.5-5.25% and cap rates have stayed low at 5% or lower. So down payments in my market are having to go up to meet DSCR requirements.