All Forum Posts by: AJ Exner

Hey Charles,

I would certainly lean DSCR as well, as mentioned above. The biggest factor that you need to take into consideration is that wherever you go for your refinance, that they are comfortable with two elements of your deal; the trust inside the LLC and the fact that it is a STR.

The land trust shouldn't be too big of an issue because it is owned by an LLC, but you definitely want to ensure ahead of time with the lender that they are okay with that kind of entity structure. The last thing you want to do is get an appraisal, move into final underwriting after weeks of work, only to get denied because of how things are structured.

Secondly, and almost more importantly, you want to make sure your lender is comfortable with it being a STR. The biggest part of a Debt-Service Credit Ratio mortgage is that they want to calculate the income of the property vs. the debt on the property incurred and there are a decent amount of lenders that are not comfortable underwriting the income of a property as a short-term rental. There are plenty that do, especially in showing a year of income production, but you want to absolutely make sure before you get in too far.

I'm happy to give some recommendations if you would like, shot a DM and would love to connect.

Good luck! 

Hey Rebecca,

How many units are they? Shouldn't be too much of an issue to find funding if they are 2-4 units. 5-8 unit rehab deals are trickier, but anything running at or above 10 units definitely becomes trickier, especially in 'undesirable' areas and depending on the specifics of the financials.

Is this their first time taking on a project like this as well?

Hey Drew,

You're right, a lot of opportunities. The biggest thing is finding lenders/programs that are good working with those lower amounts and understand the opportunities that are there.

I have a lot of clients doing it right now, and depending on that number I feel like those rent numbers are even pretty low. A lot of mid-sized towns offering up great, stabilized rents that produce great cash flows, even at higher rates. 

Hey Ben,

Sounds like you are needing to refinance to be able to purchase this new deal. Is there a way to refinance at 'normal' max (75%) and find a purchase/rehab lender that is more flexible with reserve requirements or is better at creative financing (ie seller financing, etc.) that could help you make that deal happen without over leveraging your other property?

@Jerry Zigounakis

The high rate environment is going to make it tougher, but it also makes it a unique time for investors. It hinders home buyers and will begin to drive prices down a bit as well.

What I've found is that it hinders cash flow right now, but I'm excited for the long-term. Personally, I am willing to sacrifice the short-term cash flow for long term gains.

Right now I have a property that I'm paying 7.99% on that is cash flowing just a little bit. But here in the next year or so, I will refinance it, make a little more every month, but draw out that cash to find another deal or two. Sure, its not the 3-4% from a few years ago, but it keeps enough people in the back seat to make a few more deals available that might not have been.

If it "works" now, it will be awesome later. It just might not be the crazy deal it was a few years ago.

That sounds like a lender-specific rule, or potentially a requirement based on minimum DSCR needs (maybe 1.2).

If you have a deal, I would maybe check with a few other groups. Are you going conventional or trying to do DSCR?

Hey Antoine,

I do know of a few, but you will generally see a bit of a rate added and fee "minimums" that you need to keep an eye on.

Is it for a residential property (1-4 units) or commercial?

Hey Alex,

Absolutely, seeing some great success coming out of Detroit with the BRRRR process, but there is definitely a catch to that.

You have to get some reliable GCs that know what needs to get done and how to do it, and you have to have reliable lenders that are flexible on their minimum purchase price/loan amounts and a reliable way of screening tenants (section 8 or otherwise). With a good team, BRRRR in Detroit is definitely doable, but its a unique market with its own set of challenges.

Non-recourse SDIRA notes are really tricky to find, and even some of the programs I've seen that "offer" it still struggle with the legal-ese that backs it up.

I do know of a group that just revamped their language and would do purchases at 70% leverage. Just shot a DM, would love to connect and help!

Quote from @Axel Scaggs:

Quote from @Patrick Roberts:

Couple questions -

What's the rate and remaining life of the $130k first position?

For the closing costs, how much of that was escrows? If you're currently escrowing with the existing first lien, you would be refunded the balance of that escrow account about a month or so after closing on the new loan.

 The original loan rate was high, at 8.75%, new rate is 7.5%. House was purchased in 2017, so restarting it has certainly affected things in that regard. I attached images of the closing costs. 

$10k in Origination is tough, ~3.5 points + lender fee sounds like did the heavy lifting, plus title/prop tax in TX can add up quickly.

As for the numbers, I think its easier to regret not selling in the short term, but the hope is for long-term gains/appreciation. If they can cover your mortgage and you can slowly payoff a 350k property over time, that should give you a good equity position in no time.

Plus, if rates get better that will always help. 30k-40k + Cash-out proceeds should put you in a great spot to snatch up a few of those 30-50k properties to fix up and scale.

I wouldn't be upset, sounds like you are in a good spot.