All Forum Posts by: David Lambert

Is this a 30 year fixed rate DSCR loan? What is the LTV?

 There could be other factors but from the information provided we can often get a deal like this done. Would probably reduce leverage from 70% to 65%. If you want to discuss specifics feel feel to send me a PM. I can pull up the property and give you an idea of what we could offer. 

When lenders use the term "Rural" it can be very frustrating for a borrower because the term is rarely clearly defined. It can also mean different things to different lenders. Even if the property is centered in a city with a population of 30k it may be considered rural due to other factors. Underwriters will look at the population density of the surrounding area. They will also see how far away it is from a large metropolitan area. 

Underwriters want to see that the property is in an area that will support the valuation of the property with numerous comps so they can have confidence in the appraisal. They also want to see that there will be a thriving rental market to support the property and that it is in an area with growth in case you need to sell the property.

Providing a location for your property will help us understand the issue better. Also, how does the property cashflow? How much in reserves do you have? How many properties do you have in your portfolio? Are any of those properties in this area? All of this information would be important for an underwriter when considering a rural property. 

So the tenants have been using the parking space without additional charge for the entire length of the lease up to this point? There is also no mention in the lease of parking fees? You are also moving to evict them? My first though would be that you can not unilaterally change a contract once it is in place. I would also be concerned that this would appear to be retaliatory when viewed by a judge that is involved with the eviction proceedings.

If you buy them through your LLC using a DSCR loan then the debt will NOT show on your credit report. This means it wont count against you if you go for a DTI loan later. However, you are still the personal guarantor on the loan. This means that if you default on the loan then it will show on your credit report.

You will most likely have issues securing financing for properties in the price range you are looking at. Most DSCR lenders have minimum loan amount/purchase price requirements. I know the amazing cash flow of these properties combined with the minimal out of pocket cash needed to acquire makes them very attractive. However, there can be a lot of issues beneath the surface and there is a reason that lenders find them very risky. There was a great post on here recently that outlined a lot of the problems these properties can cause for an inexperienced investor: https://www.biggerpockets.com/...

A lot of DSCR/Hard Money lenders charge an up front fee for the appraisal. They then use these funds to "bid" out the appraiser to someone in their network who is available. The actual charge of the appraisal may be more or less that what is charged to the client. Typically the difference is made up at closing. So if they can get it cheaper, they refund you the difference. If it is more expensive they charge you the extra at closing.

For populated areas in the Midwest(like Indianapolis) I typically see actual appraisal charges of 500-600. These appraisals include "as is" value and market rent. Appraisals with ARV might be coming in a little higher. I have not seen any come in as high as you are being charged.

I have worked on many rental property purchases and it is rare for a client to purchase a rental with a client in place. Most prefer to purchase vacant units because they want to place their own tenants and screen them using their own standards. Also, existing tenants are often at below market rent and can negatively effect your leverage options with a DSCR loan. In the situations where clients have purchased a rental with a tenant in place they have always received a copy of the lease and rent roll immediately after having the property under contract. Situations will vary but I would be suspicious if there was any pushback from seller when requesting these documents.

I appreciate the details and insight provided on this deal. I am curious about how it was cash flowing after renovations.

I see a lot of red flags: 1.) 100% financing to inexperienced investor, particularly in today's market. 2.) Lender wont relay terms. 3.) Lender not responsive. 

I really hope this deal works out for you but be cautious.

It'll probably cashflow a lot better with a 30 year DSCR loan. Rates everywhere have gone up but with your credit score the rates for a DSCR wont be that much higher than a conventional. I have been seeing them for 80% LTV if it cash flows properly at that leverage.