All Forum Posts by: Joseph Coleman

Hi Melanie,

The terminology for these types of loans varies across the lending industry but, based on what you described, you are looking for a long term private money loan on an investment property that is primarily based on the rental income or, in other words, the debt service coverage ratio. Below are a few common terms for these types of loan products:

- DSCR (debt service coverage ratio) Rental Loan
- Private Money Rental Loan
- Non-QM 30-Year Rental Loan

A couple more notes:

>Be mindful that working with a non-qm lender is different than a conventional lender. It is wise to spend some time clarifying with your lender what may change between the loan estimate and closing. Surprises are never fun, especially in a rising interest rate environment.

> You can search HML and private money lenders on BiggerPocket's Lending Directory For Maine

Godspeed!

@Ross Markey We have a hard money lending directory, where many lenders offer DSCR based loans that may be able to help. There are some lenders that come to mind but it depends on where the property is located and how other factors may affect the risk perceived by the lender. Is the property located in NY?

HML Directory 

Stacksource may also be able to help

If you are looking to put 15% down that would be a Loan To Cost (LTC) of 85% 

Many lenders will do 80% Loan To Value (LTV)

So if the property is worth more than the price that you are paying, you could still get a loan at 80% LTV but 85% LTC

Before passing on the deal, you could at least make an offer at a price that would make the deal work for you and the lender. 

@Pablo Flores I would get out your excel model and run both scenarios and include a conservative estimate of your return on invested capital for scenario 1 and 2 and also include scenario where your returns are lower than expected. This will give you the answer that you need.

I would also question your assumption about the ARM. Would it make a difference if your interest rate went up to 10%? The Fed has been very clear that we do not even have neutral interest rates right now. This means if the US economy continues full steam ahead with the same inflation rate, interest rates will need to be higher than inflation (currently around 10% annualized). So I would run the scenario at ~10% or 12% interest and make sure that you still break even.

@Michael P. Lindekugel 
Are you making the case that you believe housing prices will go down in real terms or nominal terms (or both)?

And do you really believe the Fed would continue rising rates even in the midst of a recession? 

 I also believe we have challenging economic times ahead but as soon as unemployment increases and inflation trends down the Fed is more likely to pause their interest rate hikes. Can you imagine the pain of increasing rates in the middle of a recession?  It's unlikely. 

Personally, I remain cautiously bullish on real estate in comparison to other assets because the debt is such an incredible asset to hold right now. Interest rates are still so extremely negative and becoming even more negative. The 1% increase in mortgage rates since the beginning of the year pales in comparison to the 3% increase in the annualize inflation rate over the same time period. This makes the change to real interest rates negative 2%! Furthermore, unemployment is still low - granted it always is right before a recession. But we don't see unemployment going up just yet. 

If real interest rates get close to turning positive again my tune will change. 

Alas, the everything bubble continues! Let me go back to sipping champagne in my confiscated Russian Yacht. 

@Joanne Jang
What is your purpose for selling?
i.e. Are you speculating that your local market will perform worse compared to another market or are you looking for greater cash flow (exc.)? 

What markets are you looking at? 

Have you talked with your lender about this? 

I would recommend asking your lender before you decide what to do as it may impact the way they will underwrite the loan. 

Also, most investors that I know (who decide to hold in an llC), also decide to create a separate LLC for each property - read this. The state in which you register your LLC will also have an impact. For several reasons, Wyoming and Delaware are often the preferred states. But definitely talk with a lawyer about these types of questions as they are very nuanced depending on your situation. 

Has anyone successfully used a series 7 in order to qualify as an accredited investor to invest in RE syndications? 

If so, can you share about your experience and any potential benefits or drawbacks? 

I have been considering this for the following reasons:

- The cost of $245 for the test seems very reasonable given the substantial increase in returns compared to a REIT

- The risk of investing in a RE syndication as a debt investor or even equity seems very low compared to the stock market or other asset classes right now 

- I would hope that studying for a series 7 would make someone a smarter investor

As a side note, how is it considered too risky for the average investor to invest in a real estate backed investment but investing in Bitcoin or Dogecoin is considered safe for the general public? 

https://www.finra.org/registra...

This type of communication is growing rapidly and I believe it is a real problem. The companies that enable these types of mass texts often champion the high conversion rate of text compared to other mediums but ultimately I believe it will backfire.

I anticipate this type of marketing will,
1. Continue to grow in use 
2. Diminish the value of text as a communication channel
3. Cause a resurgence in more old school communication methods like postcards, letters, personal phone calls, door to door exc. 

I was discussing this with an investor that has been very successful in finding off market deals and they said the best advice they were ever given was to go to your local REI meetups and find out what other people are doing.

Then DO THE OPPOSITE. 

@Mark Doty Thank you for sharing! What hard money lender did you use and why did you choose them?