All Forum Posts by: Carlo D.

Most lawyers are extremely risk averse.  Lawyers are also motivated by making money and I've seen some investors set up ridiculously complex structures.  (BTW, just because they are complex, does not make the structures fraudulent or illegal.)

In many ways, this comes down to a business decision.  In your line of investing, what is the likelihood you will get sued?  If you get sued what is the likelihood they will win and what are the possible damages? (For SF rentals, the odds are surprisingly low if you are managing your business properly.) Having a complex structure adds annual costs, but it might make more sense to enhance your insurance liability coverage instead.  Are you going to hire someone to make sure the corporate formalities are upheld?  If you don't, what are the odds you do it improperly and therefore lose any protection you thought they had.  What are the added benefits of the trust and is it worth the cost?

Personally, for SF rentals, I boosted each property's liability coverage to $500K and then had a $2M umbrella policy. For our commercial properties, we have one LLC that does nothing but own the property and another LLC that does nothing but manage the property.

True anonymity is very difficult to pull off.  If you are getting a loan, who is signing for it?  There will probably be a paper trail that is public record that someone can follow.

I track rates by following:
https://www.walkerdunlop.com/funding-your-vision/financing-o...

These are Freddie Mac rates which will be better than what you can get elsewhere, but it will give you an idea of how much rates have moved recently.  See the chart below.

I follow all rates they publish which will be:

*LTV = 0.55 & DSCR = 1.50

*LTV = 0.65 & DSCR = 1.40

*LTV = 0.80 & DSCR = 1.20

*Fixed - 5 yr, 7 yr, 10 yr. Hybrid - 5 yr, 7 yr, 10 yr

All amortized over 30 years even if the loan has an earlier balloon.  Fixed means there is a balloon payment, hybrid means it floats after the fixed rate ends.

If you tell me which loan and what LTV and DSCR will be I can post a specific chart

 @Carlo D. Rates are only one piece of ANY loan, but especially with DSCR loans. You will hear and read on BP that the rates are the same as conventional but that is NOT really true. It is not really true because to get the same rate it will cost much more in upfront costs in either origination or discount fees, AND much higher back end fees in pre-payment penalties. Some DSCR loans have up to 5 year pre-payment penalties. That kind of a PPP can be hugely expensive if rates drop on the next few years.

Lets play that out and assume a 400k loan at 7% for argument sake. That would be a payment of 2661. Now, lets say rates drop to 5% in 18 months. If you refinanced the same 400k with no PPP at 5% that would be a payment of 2147, or a savings of 514 a month. BUT, if you  are 18 months into a 5 year PPP that would cost you 4% of 400k or 16,000 dollars to refi. So, you likely do not do it. It does not take too many months of missing out on a savings of 514 to realize that PPP was HUGELY expense in actual 16,000 or savings you had to leave on the table. 

I have been doing DSCR loans (back when they were called Investor cash flow loan) since 2013 or so. They are great products when used correctly, but you have to understand the real cost and not just look at the rate.

I can share that for July so far through 62 Loans funded, we have an average DSCR interest rate of 7.716% with a range from 6.875% to 9.000%. However, generally there is about a month or two lag with DSCR Loans between what is being quoted today and what is funding today due to deal cycle, and while there has been a ton of volatility recently, newer quoted rates are dropping and I'd expect our average to be a bit lower by the time July is through and for August - probably in the low sevens range

 Hey Carlo, 

It will depend on the LTV, FICO, PPP, and transaction type. With some heavy buydowns you can get the rate In the low 6s on these loans. But on average you will find rates anywhere from the low 7s to high 9s

Hi Carlo,

As mentioned DSCR loans vary widely based off of numerous factors, credit, LTV, Prepay type, DSCR Ratio, just to name a few.

However, I am seeing rates as low as 6.625% now on DSCR products in a perfect scenario.

In scenarios with low credit scores, high LTV's and short prepays we can easily be in the 9's.

When looking for a DSCR loan to fit your needs, I recommend getting in touch with someone who knows what they are doing to pencil the loan in your best interest.

Glad to connect and get into more detail!