All Forum Posts by: Marty Johnston

Hi Luisa, 

Welcome to BP! You'll find lots of good connections and information here. Sending you a DM as well!

 Hey Omeed,

These are super tough, even more so for commercial/investment loans. What I see a lot of times is using either cash from a partner/family member / HELOC on your current home etc. OR, I almost always recommended unsecured debt to acquire properties cash when we're looking at really small loan amounts. Depending of course on your exit (refi/sale - flip) and loan type (rental/stabilized, rehab/flip, Bridge to perm, etc), this option may not be feasible. I'd need a little more detail on the goals, but might be an avenue for you!

Unsecured debt (personal loans, or startup capital) is based on you individually, rather than an asset, since there is no collateral. So your Credit Score, personal income, DTI, and Revolver Utilization is what's reviewed for determining approval, and for how much. So good credit with good income = greater funding. This is available for W2, Self Employed/1099, Retirees etc, income type doesn't matter, and since it's unsecured, it means you can use the funds for anything - in your case, it just happens to be to acquire real estate.

Hope this helps!

@Michael Ruvido couldn't agree more with the other two posts here. That's CHEAP money, a bad investment should yield a better return than what you're paying on the personal loan. Maybe Dave Ramsey will show up, but from IMO I'd continue to leverage that if your plan is to continue to acquire properties and put your capital to work.

@Jay Ben I'd agree with everyone here so far, the only addition I would make however is through gap funding. Most people recommend finding a partner, negotiating whatever "split" to come to, sometimes 50%, sometimes more/less. An alternative is using unsecured debt to cover the down payment + closing costs. You're looking at pretty steep rates though, ranging from 5% - 18% and hefty fees, albeit paid out of the proceeds (800+ credit, very low DTI and credit utilization, etc). No Prepayment penalties and this really only ever works for rehabbers or builders/developers since these terms don't pencil out for any rental properties, as they eat the cashflow, but if your deal has good numbers, these loans can help you scale quicker and save you your equity.

Feel free to DM me if you'd like to discuss this scenario a bit more!

Hey Jesse,

Its just a mobile home, not a park, correct? 

In either case, rehab funds for mobile home parks can be difficult to come by. Maybe rehab / hard money lenders won't offer CAPEX or construction hold back on MHP assets. I would suggest looking to an unsecured type financing. This is based on your personal income, credit score etc. There's no collateral, and no restricted use of funds, which is why they work great for MHP rehab.

You can find sources online, otherwise feel free to DM me, happy to chat with you more about this scenario.

@Anna L. I would follow the advice above from Mario Dattilo. Spot on.

Also, the other thing you can do, if you're in a state where you cannot "assign" a contract, then you can also utilize transaction funding to use a lender for a same-day close. Basically, they lend you money for a few hours so you can buy the property at 100% financing, then turn and sell it to your end-buyer (Maybe me! Let's chat), at the whole-sale price.

Can you send me a DM with info on this one if/after you've got it under contract and have identified your wholesale margin? I'd love to look at the numbers and see if it makes sense.

Thank you!

I can echo @Miyako L Oglesby here, I knew of this group through a different one of their affiliates offering the same program. Their base program is legitimate, which is unsecured personal loans. You 'buy in' to invest in real estate only when you can also qualify for their personal loan, which my understanding was your "investment" or buy-in to the Mo-Money-Matters program.

Ultimately, I discontinued working with their group, and the affiliate of theirs who I trusted also left their group. I have helped a lot of my clients secure gap funding through unsecured debt, and they were just one group who offered this sort of funding. They came off as very "pushy" with a lot of our investors, so I cannot say I recommend them (and still wouldn't). I have found other wonderful sources for the same kind of capital for use of gap funding, rehab funds, working capital etc who I have utilized with great success now.

In short, they're not a scam, but I wouldn't recommend the program either. Hope this helps!

Hey @Erik Kostyuk, great question! This is the absolute beauty of commercial loans, is DTI doesn't matter! Some people refer to them as portfolio lenders, they're all similar in principal. The punch-line is, so long as the properties cashflow to cover the mortgage (or in some cases, with no- DSCR programs out there, doesn't need to cashflow at all! but higher rates.), and you have the assets to close, and the property meets general parameters, you should have no problem getting a commercial loan.

Also, many people think commercial loans are only available for 5+ MF, Retail, Office, Warehouse, etc. Not quite true. Commercial loans will consider any non-owner-occupied investment property, so long as you don't intend to live in it, and its for an investment property, you can still get a CRE loan for a 1-4 Unit property. These are available for Rehab, Bridge, Rental, New Construction, and Portfolio.

Hope this helps!

Also to add, commercial will still require a minimum of 20-25% down payment depending on:

• Loan amounts
• Credit
• DSCR
• Location (rural gets LTV hits)

@Brian Plajer I do both Residential and Commercial mortgages, and you could do either option in the scenario you presented, just structured in a variety of ways:

RESIDENTIAL:
1) 2 separate loans, one for each parcel/property, this will require all income documentation (pay stubs, W2s, possibly tax returns [if you have other SREO or self employment business income] and use your personal income + 75% of the gross market rents for the two properties to calculate your debt to income ratio)

COMMERCIAL:
1) 2 separate loans, one for each parcel/property, (NO personal income needed) using only the anticipated rental income from the property to service the mortgage. Commercials DTI equivalent is D.S.C.R. (Debt Service Coverage Ratio). Most lenders like a 1.20 DSCR, some will go to 1.10, others 1.0 (1.00 DSCR would mean that for every $1,000 in a mortgage payment [PITIA], you receive a gross $1,000 in monthly rental income. 1.20 DSCR would mean you receive $1,200 in gross rental income on the property), and there are even no DSCR programs out there so you can show LOSSES and still get a mortgage. These no DSCR loan programs are mostly reserved for STR's or where the borrower recognizes future opportunity to raise rents that a lender can't utilize for qualifying at time of purchase.

2) 1 blanket loan to purchase both properties. (NO personal income needed) using only the anticipated rental income from the property to service the mortgage as well. Note some lenders require that a portfolio has a minimum of 3 properties to consider a blanket loan. This will depend on the lender. Some will still consider just the two.

Keep in mind, commercial lenders will usually have both of the following:
1) Minimum value per property, based on the appraised value or purchase price (whichever is LESS!) for 1-4's this is often times $100,000, but some will go as low as $45,000 in a portfolio loan

2) Minimum value per UNIT. This one often goes missed by investors. This basically means if you have a 3-Unit property, and you're purchasing for $105,000, you MEET the minimum value per property requirement, but this property represents a value per unit/door of $35,000. This is below most commercial lenders minimum value per unit requirement. In this same scenario, if this was a 2-unit, you'd ave a value of $52,500 /unit, which MEETS most lenders minimum value /unit requirement + value /door requirement.

The above scenarios can sometimes be 'dismissed' or exceptions given when loan amounts exceed $1,000,000.

Hope this helps!