All Forum Posts by: Ben Stoodley

@Val C. Hi Val. Few things.

1.) what’s stopping you from being banksble? Fico? Or too many loans?

2.) Are the properties currently rented? If so the private money industry has come out with DSCR loans - debt service coverage ratio - they're basically 30 year term loans based off the properties income/expenses. Credit still determines rate but otherwise asset is main qualifier.

3.) why won’t your current lender offer an extension?

4.) private money bridge loan for another 12 months?

Good luck!

@David Meier always a good idea to have multiple lenders in your network. Big lenders offer better rates typically but smaller lenders may have better service and flexibility. Message me and I’d be happy to suggest some more.

@David Meier the private lending industry created 30 year rental loan options a few years back. As their demand has skyrocketed, the options have increased and the rates have decreased. These loans are mainly referred to as DSCR loans, as previously mentioned. The qualifications are based on the subject property's income and expenses only, not the borrowers. Most lenders require only a credit check and bank statements to qualify. Furthermore, I have seen much lower rates being offered out there then previously mentioned. I have seen rates as low as 3.875% for a 30 year fixed on these DSCR products. They typically max at 75% LTV for refis and 80% of purchase. Rates typically depend on LTV and credit score. Since it's the private industry, most lenders will require an LLC as borrower, so it shouldn't show up on your personal credit, however you do have to personally guarantee them. Let me know if you have any other questions!

@Brian Stinnett oh my mistake I read your post wrong. In that case - the only thing I would add is that most HML also have min loan amounts typically $75k+ (not including rehab). Indiana has great markets but sometimes it doesn't meet the min amount. So I would suggest have a few local private investors that don't have mins in addition to a couple larger lenders that will never run out of money - and are still relationship based. Good luck !!

@Brian Stinnett house hacking is a fantastic idea to get going with investing! Hard money is a great tool to use to scale. Just to confirm, most hard money lenders won't allow owner occupied loans. So you'll want to be very upfront with any lenders you inquire with and make sure they know this upfront. Some will be ok lending still. Typically house hackers will use a conventional bank or government (fha) loan for better rates and lower down payment - and they require owner occupancy for a year or so. Otherwise all the HML terms set forth in prior comments are on point!

@Shawn S. 

I think It would be really helpful to know approximately how much money your team will start with And what your goals are, as there are a endless ways to form a partnership.

Buy and hold is a great way to start investing. It’s low risk. It’s long term and fairly low time involvement. However, you need a plan to scale that. Unless your partner has tens of millions of dollars to invest, I would assume you will still need to leverage your deals with a loan. Start with conventional (house hacking) and bank loans, then look into hard money or private money loans.

Will you be buying 1-5 properties? Or do you want to own a portfolio of real estate down the road? Assuming the latter, you will need an exit strategy to get your money out of those first few deals so you can continue investing. That's why most people BRRRR - buy rehab rent refi repeat. This way you typically will recapture your investment during the refinance process, assuming your values are hit.

Depending on the plan, you will structure your partnership accordingly. The big decision is equity vs debt. Do you want this partner long term or just in the first few deals. If just for a few deals, then you can do a JV Agreement, deal specific. Most investors structure an LLC when real estate investing. The terms of their partnership and capital investments are detailed in the Operating Agreement. You can hire a CPA to help you form the LLC or Corp or LP (rarely used). Most agree that this type of entity structure is quite beneficial if planning to own numerous properties.

The terms between you and your partner are completely up to you two. Generally the goal is to split 50/50 with the capital partner, assuming they are mostly a silent investor. If you are just starting out, I would suggest being open to taking a lower split and finding someone with capital AND experience. Experience is key.

Good luck!!

@Katie Panzica yes exactly as @Michael Glist outlined above! The higher the better. Keep in mind that the biggest factor in the denominator is the mortgage payment (principal and interest) so that’s why high prices homes like in SD don’t typically fit as well. I’ve seen this work best for SFRs valued below $400k and 2-4 units valued below $800k, in general, assuming a good rental market.

@Yin Choi the ONLY time you might pay an upfront fee is for very large commercial deals that require a Lot of underwriting.

For all residential hard money, short term flips OR long term rentals, no reputable lender I’ve seen charges upfront fees

For short term flip financing, traditional hard or private money, rates are generally 8-12% with 2-3% origination and $750-$2000 in processing fees.

For long term rental financing, new to the hard money space, rates START at about 4.125%. They are mainly dependent upon the property LTV and Credit. Assuming the DSCR remains above 1.0, most will finance up to 75% for refis and 80% for acquisition.

In short yes probably a scam due to upfront fees but close to 4% for hard money rental loans is now possible yes!

@Katie Panzica the hard money industry has come out with a long term rental product that may work well for you. Like your goal, the properties that best fit this model are NOT in high priced markets like CA. These loans look at the DTI on the subject investment property only, not your primary residence or taxes or anything else. Typically it's referred to as DSCR or Debt Service Coverage Ratio. It's the ratio of Income / Expenses (tax insurance HOA and loan payment). Right now this is only for residential properties, SFRs, condos and 1-4 units. These products have been in huge demand. They finance up to 75% of value or 80% of purchase assuming the DSCR remains above 1.0. The pricing is mainly dependent upon your credit score and the LTV. Rates start at 4.25%! Let me know if you have more questions on these products. There are tons of lenders offering them but they all seem to work mostly the same way. Good luck!

@Andrew Chacon most HMLs will require a personal guarantee nowadays. After you build a lot of repore with them, the rates will come down and eventually the PG may not be required on simple deals. The biggest problem most lenders have is borrowers walking away from deals, so that is why the PG became popular again.

Most rates and terms will be the same. Find a HML or private lender that is relationship based and has a lot of credibility closing other investors deals. That last thing you want is a lender to change at the 11th hour. So like many suggest, best to get on the phone with a few lenders and ask around the community for referrals.

There’s a lot of lenders to choose from and they each have their pros and cons. Typically smaller local lenders will have more flexibility, which may help with your first few deals.

Good luck!