All Forum Posts by: Brittany Minocchi

 You're welcome! The benefit of Section 8 - especially in your situation where you're cutting it close - is that a large portion (if not all) of the rent would be paid by Section 8, not so much to assist in finding a tenant. Good luck and I hope everything works out for you!

Is your property in the Cleveland area? From what I've seen, many people don't seem to want to take a chance there because of the POS violations and so much red tape. If that's something you're willing to deal with, I'd hang tight since you're already in it. You also might want to consider self-managing and finding a good maintenance guy that can be your boots-on-the-ground. That'll save you a bit. If you're willing to consider Section 8, that could be a help too. People have mixed feelings but in my opinion, you have a chance of having a bad tenant whether they're section 8 or not. I personally have had decent luck renting to Section 8 tenants and am also in OH, and Section 8 pays some or all of the rent depending on the tenant. So even if the tenant doesn't pay their share, you're not at a total loss. 

If you're just looking for a loan of $15-$20k right now, your best bet will be private money or a local bank. Most lenders have minimums of at LEAST $50k, many are $75k-$100k. Once the property is acquired, improvements have been made and property value increases, you could look at something like a DSCR loan. DSCR loans use the property's income instead of your income/DTI to qualify you. If you decide you'd like to discuss further, feel free to reach out!

 I'll second everything @Jack Mawer said - DSCR is a great option for the reasons he mentioned, and I'm guessing one of them is why you want something non-traditional. Most lenders that offer DSCR loans can do both purchases and refis.

Hi Erika, as others have mentioned the biggest difference between DSCR and a conventional loan is the fact that instead of looking at YOUR income to qualify you, a lender looks at the income of the property. A few other notes - this is a higher risk loan for a lender compared to a traditional loan, so you may find that they have higher down payment requirements, higher rates and/or prepayment penalties. Not all lenders will use STR income to qualify you and will instead look at market rents. This could cause an issue with meeting the debt service requirement. You'll want to make sure the property's income is high enough to at least cover the debt service (1:1 ratio). If you're looking at a DSCR on a short term property and a lender uses market rents to qualify, you may not meet this requirement. Something to keep in mind! Happy to chat further if you'd like to reach out, but I hope that helps a bit.

So far, I only know of one lender with no seasoning period that uses appraisal value and not purchase price + cost of improvements, but rates can get wild. DSCR isn't even a factor.

It'll depend on things like loan amount, credit score, LTV, property type….

The lowest down payment would be with a house hack, where you live in a unit and rent out the others (or rent out rooms). You can use an FHA loan and put 3.5% down in that instance because it's owner occupied. On an investment property with traditional financing, the least you can get away with is 15% assuming it's a single family. Multifamily you'll be looking at 25%. There are also DSCR loans where your income/employment/DTI is not factored in, but you're instead qualified based on the property's income, your FICO and reserves. Some lenders require investor experience on those loans. I'd continue to save - that $10k is likely going to be eaten up just with closing costs alone.

8% from a hard money lender on a cash out refi isn't bad, and 75% LTV is pretty typical. As far as your CU, are they suggesting you apply as though you'll be living in it while knowing you intend to rent all the units out? Or are you planning on living in one? If you're living in a unit, DSCR isn't an option - A DSCR loan doesn't permit owner occupancy (and many require that you prove you own a primary residence), and an FHA loan is only for owner occupied properties. Can't use it on an investment property unless you occupy a unit in a multifamily. 

If you're refinancing with a conventional loan, it'll be like applying for a loan all over again. Income, employment, bank statements - all that stuff will be needed. If you refinance into something like a DSCR loan, your income/employment/DTI are not considered. Instead, we use the income of the property to qualify you, along with factors like FICO, down payment, level of experience and reserves. There are different requirements with different lenders.