All Forum Posts by: Kamal Martin

Do you live in Puerto Rico?

The recent earthquakes destroyed many multi-family complexes and will continue doing so. I would go against investing in them. Maybe concrete single-family 1-4 units depending on the price point and cash flow.

Also there is no real MLS in Puerto Rico you need to find an agent for each area you want to look at. And the laws and regulations here are very different, not very strict like the states.

Prices are high and rents are low over here. A majority of people who rent homes here have 100% equity in them so any rent will cash flow. And financing from what I've heard is very difficult to get. However demand is very high, especially for section 8 which also doesn't pay very well because government funding is one of the lowest for Puerto Rico. And the hardest part of all this is finding sufficient labor to rehab/manage the property.

Use the magnifying glass on Puerto Rico.  Reach out to some of those posters.  

ok, yeah, you can do that too (get a DSCR loan without owning a primary). MOST DSCR lenders will WANT you to own your primary, but not all of them require it.

there's no name per-say on renting room by room. house hacking kind of refers to buying a house/ owning a house and then renting the rooms out (i do this in my primary). The more official terminology in the mortgage world would be "boarders" not tenants, so their rents would be "boarder income" which most lenders wont let you use for qualifying. But i digress, this paragraph is more related to consumer lending.

DSCR loans are business purpose loans, so they dont usually look at your personal income anyway. But they also typically wont' look at the rents on a room-by-room basis. IMO, this is mainly because if they had to foreclose, no lender wants to mess around with that level of property management.

That doesnt mean you can't do a DSCR loan if you are renting each room out individually. you'll just want to set it up correctly (one lease for example would be helpful), and then make sure the numbers align from a market-rent standpoint. OR, find a lender that is ok going below 1.0 DSCR, OR get creative... maybe a 40 year, or IO options.... or no-ratio/ no DSCR which is out there but higher rates :)

Im not really clear on what youre asking. It sounds like youre saying that youre looking for a DSCR lender who doesnt require you to own a primary residence because youre currently renting and do not own a primary home. If that's the case, then yes, I know there are a few lenders out there who will lend when youre a renter with a verified lease and not an owner. If that's not what youre asking, then Im not sure what to say.

Keep in mind that the DSCR lender rules around owning a home are meant to be a check on people using DSCR loans to buy a primary residence rather than a rental. I would expect that programs that allow you to not own a home will have an experience requirement, meaning that you have recent experience as a landlord with properties that you own.

 Thank you for the clarification! Not all lenders require that you own a primary residence - some will allow you to be a renter or even living rent-free. It varies by lender. 

 Are you planning on LIVING in the property?  some of you above statements have me confused.  

@Kamal Martin maybe "house hacking" wasn't the right term.... but correct me if i'm wrong, are you referring to renting the property room-by-room?

There are a TON of people who do this and utilize DSCR loans, specifically i see it in college towns, as the property cash-flows beautifully this way.

Unfortunately, DSCR lenders are more concerned with market rent, and even if you were to provide 6 leases for one property, one for each room, adding up to $10k/mo in rental income, they wont underwrite it that way.

I usually recommend my clients give me one lease for the entire property in this scenario, it can have everyone's name on it, and the actual rent amounts... but the lender will go off the LESSER of the two - lease agreement vs market rent from the appraiser. 

That said, you'll get chopped down by the market-rent component. 

There are lenders out there, though, that do not look at DSCR, go negative DSCR, or go no-ratio. If the property is only cash-flow positive w/ room-by-room rents, these may be the better option for your scenario.

Occupying a property that has a DSCR loan would be mortgage fraud and you/the lender would put yourselves at risk for hefty fines and/or jail time - DSCRs don't allow for owner occupancy.