All Forum Posts by: George Despotopoulos

If you are using this type of product for a purchase, then the rent that's being underwritten to is based on the market rent, which is established in the appraisal report (the appraiser provides a market rent analysis based on rental comps). If you're refinancing a property you own, then it's based on the lease rent (you provide a copy of your lease & evidence of receipt of two months' of lease rent). 

The rates are primarily driven by credit score and LTV. Then there are adjustments for things like property type, loan amount, prepayment penalty term, location, the DSCR (debt-service coverage ratio (basically the cash-flow) which you get by dividing Gross Rent by PITIA).

Any loan you get, whether it's a 30 yr loan from a non-bank lender or a 6-12 month interest-only hard money loan, should have some level of diligence but it's still very much easier, and quicker, than working w/ a bank or non-qm lender. 

@Zachary DeNeen -- how many units is the MFR? There are non-bank direct lenders that can do a 30 year fixed against 5-10 units. This is unique bc typically you're getting more of a commercial term product (20-25 yr amortization, 10 yr balloon, etc) for anything 5+ units. Rates are 5.5% - 7.5% for 5+ units.

If you're looking to go higher than 10 units, then another idea is to work with a non-bank bridge lender. The minimum loan amount there is typically $500k, but there may be some flexibility below that (probably minimum loan amount of $250k). A bridge loan is a good option. It will allow you to acquire the property and season title/stabilize to then go to a more perm solution. Bridge loans are interest-only, expect rates in the 8% - 10% range for that, but again it's io and there's no escrow for taxes/insurance. You can also get a 24-36 month term, with no prepayment penalty. 

@Michelle Kotler there are DSCR lenders that will lend to you based on the rental properties income and not your personal income. This would be for a traditional 30 yr fixed with rates in the 4.75% - 5.875% range currently.

@Sol Romand -- have you thought of getting a bridge loan where you can finance 80% of your purchase price (or up to 90% if you have experience) & 100% of your rehab/reno costs? You can get this done in 2-3 weeks and meet the closing date or close in cash and do what's called a delayed financing thereafter. A bridge loan is a 12 month term loan where you make monthly payments of interest-only. There is no prepayment penalty, so once you're done renovating, you can then refinance into a 30 year fixed rate mortgage. This is a good option if you think your after-repaired value is 65% - 70% of 80% of your purchase price + 100% of your rehab costs. 

Given that this seems to be a stabilized asset in rent-ready condition, it may be good to consider doing a 30 yr fixed at the start. But, like I touched upon above, I would only do this if you feel like you're not going to increase the value significantly with any prospective repairs/reno. Also, if you don't think you'll be doing a cash-out refi in the next 3-5 years, then this is a good option as most lenders have a prepayment penalty penalty in the first 36-60 months of ownership. If you're ok w/ some equity being tied up for that duration, you may benefit from getting this under a low rate (4.75% - 5.875%, 30 yr fixed) w/ only 20% down.

Non-bank direct lenders could lend to you @ 20% down as long as the loan amount is $100k+ and your FICO score is 680+. If your FICO score is 640-679, then I'd expect to put 5% - 10% more down. The downpayment should be coming from you and not in the form of a seller-second, gift funds, or unsecured loan. This would be for a 30 year fixed with rates in the 4.875% - 5.875% range. 

If you're looking to do a fix and flip or rehab & hold deal, then it's likely 20% down and rates in the 8.5% - 9.75% range for a 12 month term, no prepayment penalty, where you make monthly payments of interest-only. 

@Albertinny Colin - not sure how realistic this strategy is. To begin with, I don't think it's feasible to get a hard money lender to do a second lien right now and be in second position. Also, and it may allow for it, but need to double check w/ your first-lien lender (the commercial loan in this scenario) to see if subordinate financing is allowed. The commercial loan may also have a prepayment penalty, so if you refinance in a year or so after closing, then you'll get hit w/ a penalty/fee. Also, depending on what sort of entity/institution you're referring to with 'commercial lender,' some commercial lenders have high minimum loan amounts, which usually doesn't fit a fix and flip or rehab to hold deal. 

What's your motivation behind this strategy? Many hard money lenders are at 80% - 90% of purchase & 100% of rehab, with rates in the single digits (interest-only as well). If there was ever a time to use hard money, it's now. 

Hey @Jay Bickmore a non-bank lender (asset based lender) could do a rate/term refinance of up to 80% LTV with no seasoning and a cash-out refinance up to 75% LTV with 3 months of seasoning -- in both instances the value will be based on the appraised value. Rates non-bank lenders offer are slightly higher, as are the costs, but you benefit from usually a much quicker and easier process. Also, you'll be able to pull your money out much sooner.

@Brittney Housley you'll be able to go the non-bank lender route (aka asset based lenders or DSCR lenders) with 20-25% down. Rates are in the 4.75% - 5.875% for most.

Hey @Robert Zabel there are non-bank lenders (asset based lenders) that can do a 30 yr fixed rate against 5-10 units -- I would expect it 70% - 75% LTV and rates in the 5% - 6.875% range. These loans are underwritten to the property's income (they're qualified based on the debt service coverage ratio (which is gross rent / PITI)) and your personal income/DTI do not come into play. The minimum loan amount is typically $100k.

Hey @Michelle Kotler, yes there are lenders that underwrite to the property's income and do not take into consideration your personal income/DTI/net worth, etc. More of an emphasis will be placed on your credit score and the property. Where is the property located, what's your estimated credit score, and what's the property's projected value? Those 3 things will inform on what's the best route to take.