All Forum Posts by: Joe Davis

Agree with the others to use the market rent Vs. Sec8 - for the purposes of still falling within the DSCR parameters. We have seen far too many borrowers on STR and S8 purchase the property expecting to pull some/all of their cash out on the DSCR only to end up having to bring additional funds to close because they didn't hit the required DSCR ratio.

As many have mentioned, on a DSCR you will often have a 90 day seasoning. This isn't to say that you cannot refi with NO seasoning at all, but expect a pretty hefty rate hike on that.

On your new loan, your 30 Yr. (if that's what you are going for) are you going through a conventional lender or will you be using a DSCR - Debt service coverage ration loan? A lot of investors rent their property too early thinking that are automatically going to get 70-85% Loan to Value, but when they are capped by the DSCR they get far less.

How much are you renting the property for out of curiosity? 

Jay is correct, warehouse lines right now are a little trickier to get. However, they are not impossible. They will simply base it off the personal financial statement of the owners. My recommendation is to do the "direct placement" model until you have a few loans under your belt and then you can go back to them showing them you have successfully originated and serviced 10+ loans on your balance sheet. By direct placement, I mean find an investor who's willing to front the cash for that loan, and at this early stage give up all the interest if you have to. Now, you have done 10+ loans, and are successfully servicing them, the banks are going to be much more willing to give you LOC.

In terms of servicing software, the big boys are The Mortgage office and Mortgage Automator. TMO is over $25,000 just to set up and both of them come to nearly $2000 in cost. They will be necessary when your porfolio is $5m + but for now you can just use excel or a cheap LOS like LendingWise. Liquid Logics is also a very robust system.

Their is plenty of options for counsel and doc creation. The most prevalent is probably Geraci Law Firm, they are not cheap to start with but once you have done a good number you can move over to their lighting docs. 

Feel free to message me and I can help where needed. 

You can find a private lender willing to take 1st position for a lower loan to value to complete repairs, obviously a hard money company has their systems and processes and prefer to finance both together and escrow repairs - but it is possible.

On a DSCR, as others have mentioned - not having it repaired already is going to be an issue. But if you can repair it and season it for a while, you will be able to just have the costs associated with a single close (rather than 2 to stabilize/pay off a HML first position).

So really, do you have enough cash to both purchase and also to finance the repair? If yes - season it until you get the best DSCR, and if not you will need to do a hard money loan at much less LTV and use the funds for rehab.

I agree with James actually, we are in Houston but we are seeing a lot of borrowers acquire rental properties in the Midwest. The numbers just seem to work on a BRRRR in terms of parking less into the deal. Why not allocate 4-5 markets and start marketing to local realtors for off market fixer-uppers. Once you get a great lead throw it on BP and see what the feedback is. Goal is to get one that has equity, covers the nut (PITI) plus a little and you can get your cash out on the refi.

Happy Hunting

 What will it rent for, what is your taxes and insurance amount? Also, you might struggle to get 80% cash out on that one, a lot of lenders don't like going sub $100k. 

However, if your rent is strong enough, you should still have some spread. If the rents are $850+ i think you have yourself a decent deal. 

Just understand what the term debt service coverage ratio actually means before you lease the new acquisitions. You want them to confirm to DSCR and not be capped, as the LTV will be meaningless at that point and therefore you will have to bring substantial cash to close.

But yes, sounds like you have been looking for DSCR.

Also just another note, on most of these you will need to close in an LLC. Through conventional, I am just assuming they are in your name.

With housing in distress, there is always opportunity. Have some added tools in your bag...creative finance etc. 

I think DOM and the market being stagnant is a common trend just overall right now, not just due to seasonality. I do think we are seing homeowners come back down to earth now, so hopefully this will lead to more opportunity. 

Happy hunting, and stay warm (and closing) this winter!

Personally I don't believe the lender needs to be local to the investment. Now, it can help! Especially when starting out, as an extra set of eyes on ANY deal is always helpful - and if they know the market and have done a ton of loans there, great! 

As the other posters said, find a local Realtor or someone that has more capabilities to get out and really dig into the numbers of the property.

Happy hunting!