All Forum Posts by: Brandon Beardt

Quote from @Becky Frempter:

Hi everyone! 

We completed our first BRRR (or almost) and we are at the cash out stage. Guidelines for conventional read we can only pull out our initial investment on the purchase price (not the rehab)... we want to get our funds on the rehab and purchase back to do it again... how do you get around the 6 month seasoning of pulling more then the initial investment out?

Facts: 

Initial purchase price $45k 

Rehab $50k 

After Repair Value $125k 

Purchase 7/18/2023

Trying to pull out 75% of our After Repair Value to BRRR again now. Let us know thoughts!

 Hi Becky,

Most BRRRR investors will utilize a different lending strategy/program than going conventional since the Title seasoning requirements for conventional are so long. Most of our BRRRR clients that are wanting to refinance out of their HMLs are utilizing the DSCR program for their BRRRR projects as they can get a 75% LTV cash out refinance based on the new appraised value of the property with only 90 days seasoning. If you bought the property in July, you're already past this benchmark. This strategy helps you get your cash back quickly in order to move on to your next BRRRR project.

Quote from @Milissa Kernahan:

Hello,

I own a free and clear property in Philadelphia that is completely renovated and rented to a tenant paying $1250 per month. Looking to pull the equity out to pay off some debts (cash out refinance). Credit score is on the lower end from the debts but still above a 600. Any advice or lenders that lend these types of deals? Any advice is appreciated. 

 Hi Milissa,

Yes there are different loan options for you to consider. If you're looking for a more business purpose, low/no doc type of loan product, DSCR can be an option for you. As long as the monthly rent is greater than or equal to the projected monthly mortgage payment, you're good to go. HOWEVER, credit plays a huge factor with qualification & pricing from lender to lender. Cash-out refinance is not an issue. Max LTV for cash-out is typically 75%, but may be reduced due to your credit, so make sure to check on that when shopping around. I would almost recommend trying to get credit up a bit more ASAP, maybe in the higher 600's, as that'll open you up for more lending opportunities/programs.

Quote from @Andrew Arthur:

Currently a W2 employee, own two properties and ready to purchase a third but my DTI will not allow it. From my understanding and research the DSCR Loan is the only way in my situation. However, is the better strategy to do it within a LLC or in my personal name?

I am leaning towards in my Personal Name because I assume I would have to personally guarantee the loan anyway and I would receive a better rate? Or do people believe that I am leaving some perks on the table by not creating an LLC, especially if I plan on purchasing more properties in the future?

 Hi Andrew,

With the DSCR loan, you have full freedom to close in either an LLC or your personal name. Most DSCR programs do require a warm body guarantor as you mentioned; however, even if you close in your LLC or individual name, the labiality will not report on credit because it's a business purpose loan. I haven't seen any sort of pricing benefits from choosing to close in LLC INSTEAD of individual name. Closing in an LLC will add another layer of protection for you and your asset, so the answer to the overall "better" strategy is up to you and your risk tolerance. I would say most DSCR deals are closing in some sort of an entity, however, you have the freedom of choice.

Quote from @Ashish Wa:

Hello Folks

I may need DSCR loan for a new construction with the DSCR being under 1. Whats the ongoing rate with this scenario and fees?

Rate's and fees for your scenario will vary lender by lender as every lender will have different pricing adjustments for FICO, LTV, property type, etc, and fees (closing, processing, UWing, etc) so you're better off shopping around and getting an idea of what options are available to you. Everyone here will need more details about the scenario in order to showcase what they can provide. If you're a seasoned investor with a good FICO, you can actually get up to 75% LTV on negative DSCR purchases (no ratio). Rate, as most people on here have mentioned, will be past 9%. 5 year prepayment penalty is standard, however, you can buy this down before closing if you wish. Shop around and find a broker/lender that works best for you.

Quote from @Sean Beyrouthy:

Hello all! I am an investor in Delaware county right outside of Philadelphia. I currently have two rentals properties near Widener University and looking for my third. I know finding a full BRRRR in the current real estate environment is near impossible, but I was curious how investors currently doing the BRRRR method are able to get out of their hard/private money and have the bank acknowledge the new value of the rehabbed house before the 1-year seasoning period?

All the banks I have talked to will only give me financing on the LTC rather then the LTV of the rehabbed house if it is before the 1-year seasoning period, thus I am not able to get as much money on the back end as I would like or I have to wait a whole year to refinance out.

Is anyone else having this issue? Would love to get some insight, feel free to message me as well, always looking for new connections. 

 Hi Sean,

Many investors are in your same situation where they are trying to pull out their sweat equity as quickly as possible to further increase their RE portfolio. Instead of waiting the full year to maximize your C/O based on the new appraised value with a traditional bank, many investors are opting to go with alternative financing options such as DSCR to get that sweat equity out ASAP. Rate's may be slightly higher when compared to conventional financing, however, Title seasoning requirements are much shorter (3 months with us), there's much less documentation required (no personal income/tax returns), and you have the ability to close in either your entity or individual name. Overall, if the main objective is to get C/O based on the new appraised value of the property post rehab ASAP, alternative financing programs could be your best bet.

Quote from @Lianne Ottaviano:

@Brandon Beardt what is the best way to add someone to an LLC with the least amount of liability for them? I have a couple people I could add, but I don't understand what's in it for them and how I would approach it. Is there a way to have them in your LLC but not really be a partner in the daily activity.

Hi Lianne, that I am unsure of. An attorney would be better suited in answering how to decrease their liability. On the lending side, we just need to see that they have at least 20-25% ownership in the LLC in order for us to use them as the guarantor on the loan. I would imagine you can definitely have them in the LLC but not be part of the daily activity. You'd just need to have the conversation with that person(s) and tell them exactly what you're trying to do and what you expect of them. How they'll be compensated by being added on the LLC is also up to you.

Quote from @Dena Zeman:

Hi All, do any banks/ mortgage companies do DSCR loans under $75k & under $50k in OH and NY? If so, can you please provide the name of the bank and a contact? I would like to speak to someone who can help me with 2 DSCR loans in these states and will also need this loan for future transactions.

Thank you so much!

 Hi Dena,

We've done quite a few DSCR deals with loan amounts sub $75K, but never below that $55K threshold. The property just can't be rural. Would be happy to help and take a look.

Quote from @John Mitchell:

Hi All,

My business partner and I have signed a contract with a construction company for the purchase of a brand new quadplex in Texas. The closing date is Aug. 30th and our lender just told us the loan did not pass due to the Debt Service Ratio being below their minimum threshold. This was for a conventional loan, and they looked at both our financials and the properties, and since the properties' financials did not meet the minimum threshold the loan failed. Is there anything I can do to salvage this deal or is it dead in the water for me?

Thanks,

Hi John, that sucks to hear your current lender bailed on your less than a week prior to closing. If you're not able to get an extension on the contract, you may have to look into private HML options or just leave the deal entirely if the #'s don't make sense at that point. If you're able to get an extension, you may benefit from a negative DSCR type loan (if the DSCR is below 1.00x). We've done quite a few of these where DSCR just isn't past that 1.00x threshold. Rate will be higher of course (much higher compared to conventional), but you can buy down the prepayment penalty to 1 year or so and still be able to close on the property. After that 1 year, refinance into a lower rate if that's possible & makes sense. With whatever option you decide, make sure the #'s pan out for your and your partner.

Quote from @Jared Adams:

Having a bunch of trouble finding any lenders who have a minimum loan amount around $50-65k. $75k for first timer means like $25-30k out-of-pocket for DP and closing costs, which is a bit out of my comfort range right now. All advice/help is greatly appreciated. TIA

I've seen DSCR programs that allow for loan amounts down to around $55K-$60K, no problem. Not sure if that's the type of financing you're looking for, but that option is available for you if so. Appraised value/purchase price has to come in at at least $75K, so just keep that in mind. You mention being a first timer which can potentially cause issues as well with most if not all lenders. Not sure if you meant first time homeowner or first time investor, but lenders typically want to see some sort of previous home ownership experience.

Quote from @Ben Chung:

I have a SFH rental that I own outright (no mortgage), I want to refinance and cash-out the existing equity in that property. Current tenant's rent is $1200/mo, yr to yr. House is worth approx $150k, and assuming a standard 70-75% LTV would put the loan amount between $105-112k. As a self-employed real estate investor that's taken time off all throughout covid (recently getting back into the game), my income on paper is very minimal. Anyone have any recommendations for the best Cash-out Refi lenders? (Best rates, lowest points, no income verification)

 Hi Ben,

If you're looking for a program that doesn't require any type of personal income verification, DSCR is one option you should explore. As long as the rent is greater than the property's projected new Principle/Interest, Taxes, and Insurance payment (PITI) then the property can qualify. You won't have to submit any sort of personal income docs such as Tax Returns. Pricing will depend on other factors such as LTV, FICO score, loan amount, etc. It's a business purpose loan, therefore the liability won't show on personal credit, regardless if you're closing in a LLC or your personal name (with us, can't say the same for others). I'd suggest shopping around as there are a ton of DSCR lenders on this platform that have the ability to help you out. Rates/terms and fees will vary lender by lender, so you'll want to know exactly what you'll be paying for and what to expect before committing anywhere. Best of luck.