All Forum Posts by: Brandon Beardt

Quote from @Sheronda Nichole Williams:

I decided to repost this question to see if there are any new leads or recommendations.

I'm trying to refinance a $55K in Memphis, TN, and I'm still having trouble finding lenders at this low price point. I'd prefer a DSCR loan, but I'm willing to check out any options at this point. I have looked through similar posts and checked out those recommendations without headway. Any recommendations here would be greatly appreciated. Thanks!

 Hi Sheronda,

Finding a DSCR lender who is willing to lend on a $55K property is tough. I'm not sure if there are any out there in all honesty. Any chance you've looked into local lenders, banks, or CU's in the subject property's area? I would imagine they may be able to better assist you since they'd be more familiar with property values in that area. Best of luck!

Quote from @Gary Davis:

Hi! I am trying to find a banker/broker that finances short term rentals. I'm located in California if that matters, but buying in Texas. Does anyone have a good referral? I'm going to need to include the rental income in order to qualify. Thanks!

 Hi Gary,

Many of the respondents in the forums are lenders/brokers that will no doubt be able to help you out. Do some research on a few, read their reviews, and see what sort of STR programs they have available. Some may be beneficial for you while others may not. Make sure you FULLY understand the requirements & expectations needed for a property to qualify as a STR loan. Many lenders have different guidelines when it comes to STR financing, so due diligence is key. Often times, the appraisal report and 1007 comes back allowing you to qualify and proceed with having the property as a LTR, but it's not always the case. Best of luck!

Quote from @Jenny Milu:

I'm working on getting my first STR, I had a call with a broker from The One Brokerage ( why not, I listen to Bigger Pockets Real Estate Religiously). Anyways, the broker I was speaking with let me know I had two options for financing, one being an Investment Property Loan ( forgive me, I'm likley messing up what this is called) and the second option was a second home mortgage.

When he was talking about the Investment Property Loan, he kept talking about a "credit" to me based on comps in the area for rents if the home had never been rented before. Not credit in the traditional sense and it seemed like it was more of proof.  This was super confusing, I asked questions to try to understand more and still am feeling a bit lost. Does any one understand this credit which seems to be more like proof and why it's necessary or even matters?

Hi Jenny,
Congrats on working towards your first STR! I believe the "credit" that the broker was referring to is the fact that SINCE the property is vacant - the appraiser is going to come up with a fair market rental value for the property based on rental comps in the nearby area. It'll be shown on the appraisers 1007 report. It's a different story if there are tenants in there already - the lender would go off the current rents.
Whether or not the lender that the broker is working with will require long-term rental comparables or short-term rental comparables on the report, I'm not sure, but it would be good to know before hand nonetheless. Sometimes the STR loan won't qualify based off long term rents indicated on the 1007 report and that'll lead to problems. It's always nice to be able to submit the loan with the long term rents being able to DSCR, but it's not always the case. I've also noticed some STR lenders coming in with new, more stringent guidelines for STR's, such as previous STR experience and the property needing to be turnkey, because of how EASY it was to qualify for a DSCR loan with a STR in the past. But not all lenders are built the same and many have their own set guidelines. Ask a lot of questions and if you still don't understand, ask more! You definitely want to go into the process knowing what to expect. Best of luck!

Quote from @Joseph Haraszko:

Hi, I have flipped several properties over the last 5 years and held on to several. For my next flip, a friend mentioned using DSCR first, then if dscr not available, a bridge. Hard money has not required me to put any money down but looks like dscr does. Also seeing prepayment penalties for dscr. Not sure how to use a bridge for a flip. Any thoughts would be appreciated. Thanks.

 Hi Joseph,

When I think of a flip, I'm imagining a run down property with a lot of needed repairs, but that may be different for you. DSCR lenders aren't going to lend on a property like that, especially if it's uninhabitable. Shorter term financing such as a bridge or fix and flip financing may better suite your needs in purchasing the property. Bridges can be utilized for smaller renovations and if you're able to self fund the rehab. Fix and Flip programs will allow you to finance 100% of the rehab if you plan on doing some major renovations. Either/Or, once the project is completed, then you can refinance into a DSCR loan assuming the property will cashflow.

Quote from @Charles Granja:

Hello everyone,

I reached out to 4-5 lenders regarding DSCR loans and found it difficult to make a deal work, even in areas meeting 1% rule.

Here’s a recent scenario: 

Purchase price: 244k duplex, good condition

25% down 63.5k

Current rents: 2200, cannot raise 

Rate: 7.25%

Mortgage- 1570

Lender fees- 7500$ Origination/underwriting 

5 year prepayment penalty

This didn’t include discount points. I found a lender who would do 6.5% interest with 40% down, but it would come at a cost of 3 points so I ended up walking away. 

It seems that DSCR lending is better for situations where you can significantly improve the property or where you don't mind paying 10k more for a loan + 15-20% increase in mortgage costs each month.

For those that use DSCR loans how have you made it work? Do you balance cash/conventional properties with DSCR so that you are at least cash flow neutral? Are we just at a state in the market where it is difficult for deals to work? Do you use a different form of lending? 

DSCR lending is really great for investors who either 1) Can't qualify with conventional financing or 2) Don't want to go through the full doc process with conventional financing. If you're rate sensitive and can qualify for conventional, that route may be best suited for you. Rates for conventional financing will usually always be lower than NonQM/DSCR financing, but they have very different qualification standards and there's much less due diligence for DSCR. For DSCR, you don't have to necessarily significantly improve the property once you purchase it, but you always want to be aware of the fact that lenders will usually require any major repairs to be fixed if marked so on the appraisal. If you're referring to improving the property to further increase rental values, that's another story. Best of luck!

Quote from @Peter Jin:

Hi,

I have 3sfh and 5 units apt. And I am looking for a portfolio lender that can do a refinance or line of credit.

Any recommendations? I contact a few lender that they can't do it. Thank you.

 Hi Peter,

Typically with these portfolio loans you can have it either amortized over 30 years or even start out at a 10yr I/O with 20 yrs amortized afterwards. Assuming you have good FICO, the portfolio cashflows, and the properties are occupied, you can reasonably expect a 75% LTV cash-out transaction from some lenders. What is the reason why the other lenders that you spoke with are unable to do it exactly? That would be good to know for others responding to your post. Please let us know and good luck!

Quote from @Eddie Pietschmann:

Hi everyone!

I am looking for recommendations on who to use for a few DSCR loans. I have two projects going on that I would like to refinance into DSCR loans, but not sure who to use yet. Any recommendations would be greatly appreciated!

Hi Eddie,
Thankfully for you, the entire "Loans, Mortgages, Credit Lines" forum is filled with lenders/brokers that are familiar with and have access to DSCR financing. It's pretty much mainstream for every lender/broker I see responding to posts. I'd say do your research and reach out to a bunch of them, because while the general concept is the same for most lenders (Rental income > PITI(A) payment) some have different qualification metrics and pricing adjustments such as FICO thresholds, LTV, prepays, lender points, etc. Best of luck!

Quote from @John Geer:

Dear all,

Wanted your input on cash back refinance. My primary house is paid off, value ~300K in current market, maybe more. I have a 2nd property that I am leasing out, which is making positive cash flow ~$500/month. 

I am interested in getting a third property in the same area given its location to a large post-grad institution with good tenants. I strictly look for 3 bed/2 bath SFHs. I do not have the cash upfront to place a 20% downpayment on a property at this time. However, I was told that a cash back refinance on my primary home would be a good option to get equity out of my paid-off home. 

Is this a good idea? Or would it be better to just save up money for the next downpayment? The other option would be to get a cash-back refinance on my 2nd property that has about 48% equity (house valued at about 375K). I earned equity on this 2nd property quickly with the recent rapid appreciation in real estate market. My goal is to build a portfolio in the next 10 years or so, and pay off the properties as quickly as possible. 

Thank you all,

John

Hi John, sounds like you have quite a few different avenues you can pursue in your situation. I would only pursue a cash-out refi on your paid off primary if you're looking for a larger sum of money to take out to use for the down payment of the new property. You'd get a whole new mortgage and would have to pay interest on the entire amount. If you're looking to potentially take out a smaller amount, a HELOC on your primary may work out better. You may not be able to tap into as much equity as a full cash out refi, but that way you have access to a good deal of funds and only pay interest on the amount you actually use. It really just depends on how much cash you'd need for the down payment of the new property. Taking cash out of your current investment property is also a good strategy - I would just make sure that your property continues to cash flow afterwards given the new loan amount and rate. The good news is, you have a few different options to consider! It's just breaking each option down and figuring out which one you are most comfortable with and makes most sense for you. Don't feel pressured to take out more equity/cash than you really need. Best of luck!

Quote from @Michelle Figueroa:

I'm planning to BRRRR my next property but looking for a bank who could refinance a property after I renovate & rent it. Does anyone have any experience with a financial institution in North Carolina who might refinance a property within 6 months of purchase? Thank you!

 Hi Michelle,

Congrats on planning your next BRRRR! That's always exciting news. I'm not familiar with any local financial institutions in NC that would be able to help you out (not my local market), but there are a TON of national lenders that have programs geared towards people in your exact scenario. In my experience, some lenders are able to help you utilize a full cash out refinance within 3-6 months of being on title. Talk to as many lenders/brokers as you can to gauge what options are available for you and best suite your interests/needs (As you can see, there are MANY across the forums). If you plan on continuing this strategy, establishing a trusted relationship is key! Best of luck!

Quote from @Kim Jones:

Can anyone refer me to a reputable hard money lender. Thanks so much, Kim

 Hi Kim,

What are you trying to accomplish with a hard money lender? Details are important! It may help respondents point you in the right direction to what you're looking for. Best of luck!