All Forum Posts by: Bryan Sinkel

I think it's best to template for BOTH debt or equity. When I say template, I mean sorting out what, in your opinion, would be "worth it" for both yourself, and that investor. And having thought all that through thoroughly before-hand, will make it a far-far smoother conversation which intones confidence, and confidence feels safe. 

And then just have that, and simply share your journey, it's no-joke just that easy. When you share, it's a form of selling no script can compare with. People will find it interesting, memorable, and if there not interested who knows who they will talk to a week, month, year later that expresses an interest and they go "ya know what, I know a guy". 

I find a huge % of people have some level of interest, huge like 80%, because it's interesting, popularly known, and come on it's wealth building, who doesn't have an interest in being wealthy right. But of that 80% maybe 10% ever explore it, because most just think it's out of reach, out of their potential etc.. So this is where that sharing aspect comes into it again. You will get people asking you, pitching you, the trick is learning those signals when a person is interested because I have found most are very skidish on saying they'd be interested in "getting in", so they ask in a very round about manner. 

Aside from that, you can approach what I call "ancillary persons". In my experience TONS in the home services trades have REI interests, but so few ever do anything about it. It seems odd because they have an advantage to getting in but, they just focus on all they don't know.

A key thing is building your story, and that becomes your pitch. Because end of day what any partner is "buying" is your experience and "get-r-dun" track record. Relationship building. 

Once you start practicing this without doubt there will be many stages of evolution, and as you practice it and things come together your eye's will open more and more how there is actually $ all over the place. Anyone with an IRA, it's now popularly advised to diversify with ~10% in assets, that's how much $ just right there.

I don't personally seek $ anymore, it finds me. I have done so many "deals" over the years, I have built a reputation, meet a lot of people along the way, been happy to lend a helpful hand or insight anytime a person asks, and that just has a way of coming back around. Maybe I should focus more on it, who knows what $ I could raise if I did, so by no means am I saying what I do is "the way" of it, it's just where I am at and how I do things today. 

But yeah, I say template out both equity and debt, let them choose what feels best. Each has it's pro's and con's, I don't think a person can say 1 is necessarily better than the other. 

Have you thought about doing a cash out DSCR refinance on the unit with the tenant in place?

DSCR loans have 30 year fixed mortgage options and the rates are investment property rates. They typically start at about one percent higher than current owner occupied rates if you have strong credit and at least 20% down so 6.8 vs 7.8% for example. They don't use personal income and don't consider your debt to income ratio. They are ideal for investors who are looking to maximize their net worth since they use only your credit score and rents to qualify the loan.

Also, some lenders will use market rents provided by the appraiser so you can buy an unoccupied property and still get a DSCR loan. Also, DSCR loans usually have a minimum loan amount of $100-150K depending on the lenders I work with.

Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing generally takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. I would recommend working with a mortgage broker as there's often lower rates and fees overall as they work with lenders that either don't work directly with the public or they don't advertise directly to the public. There's lower fees as they have the mortgage broker do a lot of the work who gets paid at the end of the transaction so the lender doesn't have to pay the mortgage broker a salary or benefits which helps lenders keep costs down which translates to lower rates and fees. 

 So you want up to acquire ~10 properties PER YEAR, and curious how to make the cash work for it. 

It's simple; earn a million dollars per year, pay your 1/3 in taxes, live on a 1/3 and invest with the 1/3, that should cover down payments. 

Oh, don't have a million-$ per yr income? Well, OPM (Other Peoples Money). 

With a median home price of $300k+, even the rosiest of pictures has a need for $300k liquid capital bare minimum to acquire 10 per yr. And that's doing crazy low down on average. Not realistic. OPM is your most viable route. 

As you note you need to build a nest egg. Learn the 2 out of 5 rule on your primary. Recommend you sell it and pay no taxes. You might hate selling it, but this both gets you cash and no taxes. If you're a fixer upper or BRRR do the same thing for your next primary.

Run the numbers and you will see you need about 60 doors to cover your W2.  Build a path to it.  MFH will be an easier way to scale.