All Forum Posts by: Erik Estrada

Commercial loans typically do not report on your personal credit (depends on the institution of course).  They also do not follow residential guidelines so the loan limit will be based on the lending institutions guidelines. Each commercial bank/lender has their own credit criteria. There is nothing set and stone when it comes to this kind of financing. This is why it can be beneficial to work with a broker that is familiar with what each institution looks for when approving a loan.

 Hi Srini, 

As others have stated, this requirement is specific to each DSCR lender.

There are several that will allow you to close in a layered entity. You will just need to show the warm body guarantor, by providing the operating agreements for each layered entity, along with the EIN, Articles of organization and certificate of good standing. 

 Hi Michael, 

Both DSCR and Hard Money Loans require a hefty down payment. Usually 15-25% down for a new investor. They are both entirely different loans.

A Hard Money loan is a short term loan with a balloon used to purchase distressed properties. The loan is interest only and 12-24 months at most. Typically most lenders will do up to 90% of the initial purchase price and 100% of the rehab for experienced investors. If you are new, you will likely need to put 15-20% down + closing costs. Some lenders will also want to see 3-6 months reserves. This loan works well on properties that need renovation and you are looking to flip or incorporate a BRRRR.

A DSCR loan is a 30 year fixed long term loan for stabilized rental properties. There cannot be any significant repairs needed on the home to be eligible for financing. On a purchase, lenders will finance up to 85% of the purchase price as long as the monthly rent can cover the full principal, interest, taxes and insurance payment. If you are new, you will likely need 20-25 % down + closing costs and 3-6 months reserves.

You can use both to perform a BRRRR. Finance the property with a hard money loan and then cash out with a long term DSCR loan. Most lenders will do 75% of the new appraised value on a cash out as long as you have completed rehab on the property.

Just work with a JV partner

 Both are great options, but your experience will depend on the account executive you work with. 

I would recommend going through a broker that does a lot of loan volume instead of going direct. When you go direct, you will likely get a newbie loan officer and it will take gruesome 45 days to close your loan. And good luck getting them on the phone to answer your questions. 

When you work with an experienced broker, it will be a lot smoother process. They generally work with veteran account executives, know the lending guidelines, and will provide usually the same or sometimes better pricing. 

This is not to bash on Retail Account Executives, as if you are a top producing investor with several hundred deals a year, you will likely get A-paper service going direct. But if this is your first rodeo with them, you should lean on a broker to help execute for you. 

Hey James, 

Yes you can roll in the payments on a fix and flip loan, usually at 85 LTC if you have light experience. You cannot live in the property however. 

As a lender, I do like the private lender conferences. Not only to meet potential clients but also to learn about what other lending companies are offering. Sure there are some companies that virtually offer the same product and are rebranded, however there are the small few that can really get down to some niche loan products. If you are the only guy offering the product and marketing it better than the main source, your phone will not stop ringing. 

But I only do this once a year. Most of the time I am marketing myself online and building my reputation. 

Hey Havan, 

Happy to connect 

 Hey Mark, 

A 12 Unit DSCR loan will typically require at least 12 months to Cash Out Refinance on the new appraised value. You may want to try a local credit union or bank to see if they can do a 6 months seasoning minimum.

Additionally are all the units occupied? Most lenders are going to want to see full-occupancy (handful will do 75% occupancy) On a 12 unit MFH. 

Lastly, what part of Ohio is this located in? If it is in a Rural Area, it may reduce your LTV. I am seeing this at 65-70 LTV for the time being.

Quote from @Linda Weygant:

Quote from @Chris Seveney:

Quote from @Linda Weygant:

I'm a CPA, serving real estate investors.

This time of year, clients who are on extension will request proof that they are on extension for their mortgage broker.  Because I live in the 21st century, I EFile the extension for my clients and my software receives a confirmation back from the IRS and/or state that there is now a valid extension on file.  The proof exists in bits and bytes in my software, but my software can generate a letter that looks like this:

All of the smart people I know would look at that and say "Yep, that's proof of an extension being filed all right.  Even gives me the confirmation number.  Cool!"  HOWEVER, the bright folks in the lending industry say "No - I want the form!".  I do get it.  Back in the dawn of time, about 15 years ago before EFiling was so prevalent, it used to be that you'd print out a form 4868 and mail it to the IRS to request your extension.  The IRS would stamp it as "approved" and mail it back to you and that was your proof that you had a valid extension.

Somehow... SOMEHOW... in this day and age, this is what you guys still want???  Why??  I mean, my software can still generate that form and print it out.  But if I do so, it doesn't mean that it was sent to the IRS and it certainly doesn't mean that it was accepted/acknowledged.  The IRS no longer stamps the paper copy and sends it back.

In fact, the client could just go online and complete the form using Adobe and give it to you and it would be proof of exactly nothing.

So tell me..  Please, because I'm dying to know.  Why are you like this?

 Which lenders specifically are you referring too (name names)? We are a correspondent with over five lenders and not one has ever asked for this? 

Unfortunately, I don't know the companies or I definitely would be naming and shaming.  All communication uses the client as the middle man as the ethics of the profession prevent me from even acknowledging somebody is a client without a form on file.  But my clients are nationwide (I'm a virtual firm) and this comes from clients across the country.  Current one that chapped my hide is in KS, but I've had it from CO, CA, AL, GA, NJ, IL and WI in the last year.

 Bingo! 

The real issue is the lender hiding behind the screen and not having any open communication with you. A lot of the issues stem from miscommunication from Third Party, to Borrower, to Loan Officer, to Underwriter. 

I know some of the forms required can be gruesome and annoying, but like many fellow colleagues have stated, it really just depends on any overlays the lending entity has. The more conservative they are, the more they will ask for.