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How Much Cash Should You Really Have Before an Acquisition in Franklin? Everybody asks about the down payment. Almost nobody asks the harder question, w...
Everybody asks about the down payment. Almost nobody asks the harder question, which is how much cash you should actually have sitting in the bank before you sign anything. This is for buyers and investors eyeing a Franklin property who want a real number, not a feel-good rule of thumb.
Plan on the down payment plus roughly 8 to 12 percent of the purchase price on top of it, and then a reserve you don't touch. That last part is where most people cut themselves short.
The down payment is the number everyone fixates on because it's the biggest and the easiest to picture. But the down payment isn't the cost of buying. It's the cost of the property. The cost of buying includes everything you have to pay to get from an accepted offer to keys in hand, plus everything that happens the week after you move in and realize the water heater is on its last legs.
So when someone tells me they've saved exactly 20 percent and nothing more, my honest reaction is that they've saved for the house, not for the purchase. Those are different things.
Here's where the money actually goes on a Franklin deal, and none of it comes out of your loan.
Closing costs run somewhere between 2 and 5 percent of the purchase price for buyers in Tennessee. That covers lender fees, title work, recording fees at the Williamson County Register of Deeds, prepaid property taxes and insurance, and a stack of smaller line items you won't remember later. On a $600,000 Franklin home, that's roughly $12,000 to $30,000. The breaks down what belongs on that list so nothing surprises you at the table.
Then there's earnest money. In our market that's commonly 1 to 3 percent of the price, and it's due within days of an accepted offer. You get it back at closing, applied toward what you owe, but you need it liquid and ready right now, not tied up in a CD that matures in September.
Inspections come out of pocket too. A general home inspection, plus specialty inspections if the property calls for them. Older homes near downtown Franklin or out toward Leiper's Fork may want a sewer scope, a radon test, or a closer look at the foundation. Budget a few hundred to a little over a thousand depending on how much you check.
For an investment property, add appraisal costs, possible survey work, and any due diligence you're doing on rent rolls or existing leases. Commercial acquisitions layer on environmental reports and legal review, which is a different conversation and a different number.
Set aside three to six months of the property's full carrying cost, and keep it separate from everything above. This is the number that separates buyers who sleep well from buyers who panic.
Carrying cost means the mortgage payment, property taxes, insurance, and for investors, the money you'll spend while a unit sits empty between tenants. Franklin rents well, but "rents well" is not the same as "rents the day you close." A month of vacancy is normal. Two isn't a disaster if you planned for it.
For a primary home, the reserve is your cushion for life. The HVAC that quits during a July heat wave. The job that changes. The roof that looked fine on the inspection and then didn't. You don't want to be the person who bought a beautiful place in Westhaven and can't afford to fix the dishwasher because every dollar went into the closing.
Lenders often want to see reserves anyway, especially on investment loans, so this isn't just my opinion. It's frequently a requirement. Better to have it because you're smart than because a underwriter forced you.
A primary residence and an investment property are not the same math.
If you're buying a home to live in, you can be a little leaner on reserves because your income is covering the payment and you're not carrying vacancy risk. Down payment, closing costs, moving expenses, and a solid emergency fund. That's your stack.
If you're an investor, the reserve is heavier and the due diligence is more expensive. You're planning for turnover, repairs between tenants, and the reality that a rental generates cost before it generates income. Investors buying multiple Franklin properties in a year, which is more common here than people outside the market assume, need to think about reserves across the whole portfolio, not one deal at a time. One vacancy is manageable. Three at once, with no cash behind them, is how good portfolios get sold at bad prices.
Commercial is its own animal. Tenant improvement allowances, longer vacancy windows, and legal costs mean your cash position needs to be deeper and your timeline longer. If you're stepping into commercial for the first time, budget more than you think and talk to someone before you commit.
Take the purchase price. Add up your down payment, then about 10 percent for closing and buying costs, then three to six months of full carrying cost. Total it. If that number makes you flinch, you're not necessarily unready, you just found the honest starting line instead of the optimistic one.
The buyers who do well in Franklin aren't the ones with the most cash. They're the ones who knew their real number before they fell in love with a property. When you know what you can actually carry, you negotiate from a calm place, you don't stretch past your limit on a bidding war, and you close without draining every account you own.
That's the whole point of doing the math early. Not to talk yourself out of buying. To buy the right thing at the right time with enough left over to enjoy it.