All Forum Posts by: Greg Downey

Rehab loans are largely based on experience and DSCR (long term) loans are largely based on FICO and LTV. If I were building a calculator, here is what I would use as place holders for each of those products:

Rehab loan - 85% of total project cost financed, not to exceed 70 % of ARV with a rate of 11% interest only and 2.5 points

DSCR - 75% of ARV with a rate of 8.25% 30-year fixed with 2 points

Notes on those loans: rehab loans can be more aggressive with leverage and rate BUT this should be a pretty safe placeholder. For DSCR, the big variable is the interest rate. That is the number I would use TODAY (11/3/2023) BUT the treasuries have decreased ~40bps in the last 3 days. You'd need to keep a pulse on that number a little bit more regularly. All of the other numbers should be pretty steady.

@Account Closed....[insert "nothing to see here" gif]......Certainly not for beginners... responding to Neal though... you probably wouldn't have any issue. You'll want to clearly document the exchange of shares etc. Looking into the future, an inquisitive lender may have an issue with proving your ownership. That would only come up if you wanted to refi... and with the rate that you are likely inheriting... you wont be doing that.

@Neal Weinstein if you transfer title, the title company should notify all lien holders. It is up to them whether they want to call the note due. This is a real risk in the subto game. I believe Pace himself had one called due a few weeks ago. I'm sure that he is able to weather that storm with attorney fees and possibly paying the full note. You'd want to make sure that you have that ability as well.

@Paul Klei, saw your post in this forum as well and though I'd be able to give some lender-guy insight. There aren't really any loans that will give you, a human or and entity (which is owned by a human) soley based on property-specific information. 

The simple thought experiment here is that if I were to drop $100,000 cash into a safe at an investment property, that investment property will do nothing with it, and the money will just sit there and provide no value to anyone or anything.

There are "asset-based loans" that focus primarily on the asset's ability to pay on the debt BUT ther is ALWAYS going to be SOME sort of insight into the human borrower as they are the one that is going to make the money do the things that make the asset function properly. 

Even in a non-recourse loan, the KP will sign for "bad-boy carve-outs" and that KP's experience and financial position is looked at to SOME extent. 

Hope that give some insight into "asset based lending", which is basically a spectrum.

@Paul Klei, I'll drop you a DM shortly but wanted to reply to the forum as well. The couple of programs that we have that do 100% LTC are not just. "I have a good deal, give me money with no questions asked". I'm not saying you are saying this BUT it is worth bringing this up based on" I just need to xxxxxxx to qualify". 

The main qualification is that you have real rehab experience. Generally, you'll need 5+ experience in the last 3 years. That can be expanded if there is legitimate experience beyond 3 years BUT this is the main inclusion/exclusion criteria for all of the 100% programs as the lender is taking on a massive amount of risk. They want to know that the borrower has a history of executing. 

@Kim Hopkins, whats the word? You have all of us legal and loan guys on the edge of our seats.

 I've got a couple of programs that will do that on our platform. You'll need to have a bit of experience AND those deals aren't for people with NO money. It's just so that you don't have to put money into the deal. 

We have had really good luck for our clients with both Obie and Steadily. They both broker but seem to have different sources in different areas, so worth pricing both out BUT that should give you some pretty broad "shopping" with pretty low effort.

@Account Closed, congrats! You got this. #1, there are plenty of deals being done right now. As an agent, you'll want to understand how that specific investor underwrites a deal. You'll want to be good at accurately assessing As-is value (for cruddy properties) and After repair values....this requires two sets of comps. You'll also want to be able to accurately assess market rents. 

Once you have those numbers, you'll want to be able to understand some of the basic "rules" that investors follow....your specific investors will have their own that they follow. Here are a couple:

All-in cost on a rehab should not exceed 75% of the ARV. Market rents should be 1% or greater than 75% of the ARV. You'll basically want to get in the head of the investor from a number's perspective.

I would also want to get to know their previous experience. That will give you a good indication of their ability to execute on a deal. 

@Taylor Robertson, if this was a straight turn-key purchase, I would say that you don't have any real exciting way to make this reasonable for the family member unless you give up 50% of the equity and cashflow.... likely making it boring enough that neither of you want to do it.

BUT

Since you said that you are going to rehab the deal, I would consider treating the family member like a lender. the provide the money, once you complete the refinance, they get their money back plus interest and you keep the property. Ask them what they would need. The only other things that you'll need to consider if you go this route is that the primary rehab lender would not likely allow them to hold a lien on the property AND they may want that person to be on the borrowing entity since they in-fact are providing all/most of the "skin-in-the-game". Both of those things are solvable with the right loan product. 

Git'er DONE!