All Forum Posts by: AJ Exner

Hey Wayne,

In the DSCR space, most lenders would treat 3 units (2-4 unit) within the same classification as a 'Single Family' DSCR with maybe a small increase in rate, but your leverage options should be about the same (20% down).

James,

The benefit is keeping it off of your personal DTI, funneling into an entity, and simplifying the process as a whole.

I have plenty of clients who 'make' enough and would have no trouble qualifying, but there is a benefit to keeping liability off of yourself and funneling your debt, et al. through the asset itself.

Plus, if you keep it at 1-4 units, most DSCR lenders would still qualify that as "single-family" so you would still be eligible for 80% leverage on purchases and 75% (or sometimes 80%) on refinances.

The true advantage is when you start to scale and acquire more properties. Conventional is fine when you are just starting out, but as you get more and more, the DSCR becomes more of an asset.

Good luck!

Hey Mike,

Any previous Ground Up experience? That will usually be the first question for most lenders.

Wayne, 

You'll also have to take into account the monthly HOA dues into the DSCR calculation. Many lenders will lend to either warrantable or non-warrantable condos, but HOAs can be the real DSCR killer if you're not careful.

Down payment should be about the same (20% on a buy-and-hold) but you'll see an additional $3-$6k on average in CC and the ability to keep it off of your DTI/Personal credit along with hopefully no more hard inquiries on your credit (many lenders will accept/perform a soft pull).

Annwar,

Most credible HM Lenders are far from predatory, because if they do, they don't do it for long. 

Its a way to scale up without battering your own personal ability to buy personal real estate. They tend to be more lenient than traditional lenders (banks, etc.) and focus on the details of the deal more then anything. Many lenders will just focus on your ability to pay them back in the time and allow you to 'lather, rinse, repeat' as much as possible, without the same type of underwriting procedures. 

For example, instead of tax returns and W2s they will check bank statements and the After Repair Value (ARV) to underwrite the loan. This allows many groups (I know the crew at Easy Street can do this) even close a loan in a week or less.

They'll stay off of your personal credit, while not impacting your personal debt to income which is valuable as you start to scale. Then, they will fund a portion of the purchase price (80%-100%) and usually 100% of the rehab on a reimbursement basis. 

HERE is a link that might help you find a lender. There are some bad ones out there, for sure, but there a lot of good ones that, if leveraged property, will help you scale and grow your portfolio sooner than you think.

Good luck!

DSCRs are high 7s, low 8s for a 30 year fixed from what I've been seeing.

Hey Byron,

So the advantage of doing Refi compared to a HELOC is that the heloc is personally backed to some degree while a DSCR refi is backed by the (hopefully) cash-flowing asset. Especially if you don't refinance at maximum leverage and do 60-70%, it optimizes rate and terms, while still getting you the cash you need.

I hope that helps, happy to assist where I can.

Robert,

Would either have to look into some kind of a Quit Claim Deed to transfer it into your entity, or just fully refinancing either cash-out if you have any equity, or doing a rate and term refinance where you just transfer the existing debt in the property into your LLC.

Payments could go either way, by being a member of the LLC, any rent payments could be linked to you pretty easily.

Agree with @Devin Peterson on this one, you are absolutely describing a DSCR loan.

The additional advantage to a DSCR loan is that they do not impact your DTI and you can keep them inside of an entity to help provide an additional layer of liability coverage if you would like

Entities would also allow you to be flexible in your ownership structure, if you need to add someone like a credit partner to help get better terms.

Just shot you a DM, would love to see how we can help.