Question 1

Why is a portfolio line structurally cheaper to record in Tennessee?

Accepted Answer

Because Tennessee taxes a revolving line once, on its stated maximum. The indebtedness tax is $0.115 per $100 of debt with the first $2,000 exempt, and the mortgagor pays it. For a revolving line the tax is charged once on the stated maximum, and re-draws are not taxed again. So a repeat buyer running acquisitions through one line pays the recording tax on the facility rather than on every deal. On a $2,000,000 stated maximum that is $2,297.70 up front (1,998,000 / 100 x 0.115 = 2,297.70), and the fifteenth acquisition inside that line adds nothing to it. The catch: an increase beyond the stated maximum is taxed on the increase, with no second $2,000 exclusion, so size the maximum for where the portfolio is going, not for where it is today. This has no equivalent in most neighbouring states.

Question 2

Does releasing one Tennessee property from the line trigger new tax?

Accepted Answer

Releases are not a taxable event we can point you to, but new debt is. The Tennessee rule we can state plainly is that the indebtedness tax attaches to recorded debt: charged once on a revolving line's stated maximum, again on any increase above that maximum, and not on re-draws. On assumptions, there is no indebtedness tax where the seller stays liable, while a new contract that cancels the seller's obligation is new debt and is taxed. If you sell a property out of the facility, the buyer's own financing is that buyer's recorded debt and carries its own tax, and the grantee pays the $0.37 per $100 transfer tax on the conveyance. Have your closer confirm the exact instruments and the county recording fees before the release, because county fee schedules are not published uniformly.

Question 3

How does the assessment class split affect a mixed Tennessee portfolio?

Accepted Answer

It can change your tax line by 60 percent on identical value. Under TCA 67-5-801 residential and farm property is assessed at 25 percent of value and industrial and commercial at 40 percent, so the same market value carries a materially higher assessed base once a parcel is classed commercial. Across a portfolio that means the tax line is not a single blended assumption, it is parcel by parcel. We will flag what we cannot answer: whether Tennessee classes a 5-plus-unit residential rental as commercial is not settled in our sourcing, and it is exactly the parcel type a portfolio borrower is most likely to hold, so get the classification from each county assessor. There is no state property tax; each parcel pays its county levy and, inside a city, the municipal one too. Metro rates live on the metro pages, for example Nashville portfolio loans.

Question 4

How do I manage appeals across a Tennessee portfolio?

Accepted Answer

On the county calendar, which is the same shape statewide but not the same dates. The tiers are: an informal review with the assessor within 10 days of the assessment notice or by June 1; the County Board of Equalization, convening on or about June 1, with the window closing when it adjourns and the dates varying by county and year; then the State Board of Equalization before August 1, or within 45 days of the county board's notice, whichever is later. Portfolios spanning West, Middle and East Tennessee therefore run several calendars at once, and the counties also sit on different reappraisal cycles of four, five or six years. Diary each county separately and check current-year dates rather than reusing last year's.

Question 5

Does the FONCE exemption survive a growing Tennessee portfolio?

Accepted Answer

It can, within limits that catch scaling investors. The family-owned non-corporate entity exemption from franchise and excise tax requires at least 95 percent family ownership and at least 66.67 percent of receipts from passive investment income. Residential rents qualify only from properties of four units or fewer, though there is no limit on how many such properties you own, which is why the exemption suits a scattered single-family portfolio. Commercial rents do not qualify, management fees generally disqualify, and a capital gain on a sale is non-passive in Tennessee regardless of federal treatment, so trimming the portfolio can blow the test for that year. Form FAE183 is due by the 15th day of the fourth month, with a $200 penalty per late occurrence. Take the structure to a Tennessee CPA before you buy the next asset.

Question 6

How many properties do I need, and what is the minimum Tennessee portfolio loan?

Accepted Answer

Five or more properties, and $500,000 and up. Below that count or that balance the structure does not pay for itself and a property-by-property loan is usually cheaper. The facility carries a single payment across the portfolio and allows individual property release, so you can sell one asset without unwinding the whole loan. That release mechanism is the feature that makes a portfolio line workable for an investor who still trades. Subject to underwriting.

Question 7

What credit do you look at on a Tennessee portfolio loan?

Accepted Answer

We look at the portfolio's performance first. We do not publish a minimum score on this program, and there is no hard credit pull to start. The file is built on the properties, the rent roll and the aggregate leverage across five or more assets, and a weaker credit file is generally answered with lower leverage rather than a decline. Bring the rent roll, the leases and current tax and insurance figures for each parcel, since Tennessee's tax line varies by county and by assessment class. Subject to underwriting.

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