Hey all, have not seen any posts regarding this - thought it might be useful for investors using hard money and those interested in hearing another perspective on the local market. ***Please note. This information is strictly sourced from investor conversations, appraisal feedback, closed loans, and inbound leads from investors previously working on deals with other lenders***
I welcome all criticism and feedback as this is meant to start a dialogue that will help us all better evaluate deals:
1. Deals that are still moving in DFW: $375k and below is continuing to be a price point where builders and investors can sell their inventory quickly (assuming the product actually matches the market)
- The new 40yr amortizing loan program will likely be a benefit for investors enabling more buyers access to these price points
2. DSCR - High property taxes, rising insurance premiums and stagnant rents are making 30yr DSCR loans harder and harder to pencil for investors. This should be at the top of your mind when getting into any rehab loan... "Do I have multiple exit strategies"
- Not to mention, new Fannie May seasoning requirements will play a big role in how BRRRR investor's business models operate - Now requiring 12 months seasoning as opposed to 6 as of 3/7/2023 (see link 1 at bottom of post)
3. Overleveraged bridge loans - 6 month financing at 100% LTC is not uncommon in DFW. However, as the market softened early this year many investors found they were not able to sell these properties to pay off their loans. Nor were they able to refinance without bringing equity to the table... this is a big deal and goes back to my previous point, check that you have multiple exit strategies in place.
4. Demand for housing is still very strong in DFW and beyond. Yes, gentrification is happening in many areas around the metroplex, there's no denying it. What happens to the residents in those areas who sell their homes and need to move elsewhere? They need to find new markets to move into that are affordable enough to purchase in. Hint, affordable builds are still flying off the shelves. Great for builders who can manage costs well. I've heard plenty of people throwing out numbers about how much TX migration is increasing, "250 people moving in per day, 5,000 newcomers per month, etc"... you be the judge. See Link 2 for some data.
5. Flips with great margins are still out there, though seemingly less present when not every market is appreciating like we saw over the past 36 months. Buying right should still be the priority, but managing project timelines on hard money loans is as important as ever. Wholesale deals are getting thinner and thinner.
- Seeing a lot of flippers looking into trying their hand at new construction. If I could give one piece of advice... get to know someone in the permit office. They will save you hours of time and a whole lot of money by preparing you for how to best take on these kinds of deals.
6. Refinance volume is down as a whole - Why wouldn't it be with everyone locked in at sub 5% 30yr rates. Less loan volume across the board poses challenges for some larger institutions to keep funding at the leverage they had been previously. Not to mention the trickle down from SVB and Signature Bank threatening smaller local banks nationwide. Though I will always advocate for hard money as a resource, now more than ever is a time to have a robust network of lenders to keep your business in motion as many have gone pencils down. That includes hard money, local banks, private money, and your own cash.
Link 1: Fannie Mae Announces New 12-Month Seasoning Requirement for Cash-Out Refinances | Black, Mann, & Graham L.L.P. (bmandg.com)
Link 2: Here's Where Everyone in America Is Moving to, Per Census Bureau Data (businessinsider.com)
