All Forum Posts by: Aaron Pfeffer

This sounds like the perfect DSCR scenario. SFR rental property that you can cash out and do long term financing on up to 75% LTV based solely on the expected rent covering PITI. Can absolutely keep the vesting in LLC and do either 7 year or 30 year you are looking for. Could even do long term interest only option to keep the cash flow looking better for a little while.

If the property is non-owner occupied you can absolutely get a hard money loan to build an ADU. If it's your primary residence you're really looking at the HELOC or cash out refi route. Also keep in mind that if refinancing back into a long term loan when done that Fannie Mae guidelines will only allow for one SFR + 1 ADU. no junior ADUs or additional ADUs. You'll have to prove the property is now multi-family now if you're going that route.

$36,000 in closing costs for that loan size? That seems...relatively insane.

Trying to follow this...

HML no problem, but additional PL problem? Because even with little to no experience you're going to have little issue finding an HML to fund your project if you have enough skin in the game. There's always a tipping point if the project pencils. But if you need both an HML to supply the construction financing and a private lender to also supply you with money (gap financing or JV agreement of some sort), yeah that's not going to be easy. The HML isn't going to love you also using private money unless that money is a partner and inside the entity you are using to borrow and the HML can have them guaranty the loan as well. And a private lender isn't going to love your lack of experience and the fact they will also be tied to an HML loan, unless of course your project and plan are fantastic and they are going to get a big piece of the upside.

Small one off flip loan...HML and PL easier to pair together though still not entirely easy. Multifamily townhomes (plural) where you need both HM and PM and you're not highly experienced? Tough sledding.

You can occupy one of the units on a duplex, triplex, or quadplex and get conventional financing on that property, but with what you are pitching you're going to have to do a loan on each of them and all of them will have to be a conventional investment property loan or DSCR loan or portfolio (blanket) loan across all of them. You could get one primary residence loan in the one you live in, but just that one.

It's also always important to look at your potential investor like a hard money lender does. What will they be looking for to say "no," and that's how red flags will present themselves. Number one on the list? Do the numbers really make sense and should this particular borrower be taking on this debt if they do. Number two on the list? Everything else.

Hi @Anthony Vu, I am from you great state of California and do DSCR loans. As @Stephanie P. pointed out, ARM just means Adjustable Rate Mortgage and DSCR stands for Debt Service Coverage Ratio. And DSCR loans can be...

ARMs - where usually the first seven years of the loan is on a fixed interest rate and then it will adjust

30 Year Fixed - The gold standard for all loans

30 Year Interest Only - The first ten years are interest only and then the rate locks in and the next 20 years become principal + interest

40 year Interest Only - The first ten years are interest only and then the rate locks in and the next 30 years become principal + interest

The gist of DSCR loans is that you are using the cash flow of the property to qualify for the loan rather than your finances. Which is part of what makes them so attractive to real estate investors (the other part being that they offer long term financing solutions when it used to be so much harder to get get long term financing on rental property). And of course, you can cash out your property up to 75% LTV.

Obtaining these loans takes running credit, proving rent roll/cash flow (or using market rents for the coverage ratio instead), and an appraisal (sometimes two) proving the value. Those are the big items needed.

If you want to talk more about it feel free to DM me.

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What second lienholder wants to be in a 30 year fixed position behind an adjustable rate mortgage? The only answer is cash out refinance combining first and second into one new long term loan. You'll drive yourself mad trying to find any other alternative.

Most DSCR lenders are now at 75% LTV with all the recent volatility, but 80% is still doable with a few of them. 80% of $90,000 is obviously $72,000, and that's right on the border of where most DSCR lenders bottom out. Probably some who do $50,000 DSCR loans in certain states.