All Forum Posts by: George Despotopoulos

@Daniel Kirk - I'll let others in the conventional space chime in but I believe once the rental income profits/losses show up on your taxes for 2 years, they are calculated by using that figure reported. They average the 2 years to get a monthly amount of income or debt.

If you're moving faster than banks can keep up then you can always work with a non-bank lender that does not look at your DTI but instead is more asset-based and considers the rental property's income solely. If you're purchasing a rental using a non-bank lender, then the lender will use the market rent for the subject property to underwrite the loan and all that's required is that the gross rental income covers your monthly payment of principal, interest, taxes, and insurance.

David, you could get 80% of purchase & 100% of rehab budget as long as that total loan amount is 65% - 70% of ARV. It depends on your experience, credit score, liquidity, and the market the property is in.

@Wei Jie Yang - where are the deals located and what's the purchase price and rehab budget per property? 

Hey Alexander, the fees are high on the quote you received. Assuming a combined value of $700,000, 65% = $455,000. The fees at $29,000 are 6.37% of the deal. Not sure what they're providing for with that number, so it could be standard if it includes origination fee, appraisal costs, processing/application fees, and title's fees. But even with all that accounted for in the $29k, it's a bit high. 

Usually, you're looking at an application/processing fee of some sort, let's say around $1,000 for a portfolio of this size (with 40% - 60% due upfront and the rest at closing), then you'd need to budget for appraisals, figure $600 each ($4,200 total). Then at closing the origination fee (the lender's fee) is usually around 2% of the total loan amount which here is $9,100 and then there's also title/recording fees which are standard on each loan and usually around 1.75% ($7,962). So all in, your costs for the loan from start to finish for a 7 property portfolio loan should be around $20k - $23k. 

The 30 yr fixed at 5.9% is very competitive right now though. It's below market, especially for loans where the property values are at or below $100k. I'd expect competitors to be around 6% - 6.875%. 

The terms I quoted  were more so for first time investors. You get financed without experience by having strong liquidity, average to above average credit, a deal where the numbers work well, and most importantly putting more money down. For borrowers with 0-1 deals in the last 36 months or so, I think you can overcome the lack experience with a 25% - 30% down-payment and doing what's called an interest reserve. An interest reserve of 3-12 months (depending on the lender) could compensate a little for the lack of experience. Basically you'd be prepaying  some of your monthly interest payments ahead of time at closing. The rate will also likely be a little higher (11% - 13%) and the origination fee would be around 2.5 %- 3.5% of the total loan amount. 

We'd need a bit more info. Is there any particular reason why it's challenging? Any issue with credit/background? What's the purchase price? What type of property?

Hey @Jason Lewis - given that you have experience, albeit not recent, 700+ FICOs and liquidity, you should be able to find decent terms. I'd expect to put 25% - 30% down on purchase. Most will do 70% - 75% of purchase + 100% of rehab budget, with the total loan amount capped @ 65% ARV. Rate likely to be in the range of 11.00% - 11.75%.

@Leland Bishop-- for first time investors, the expectation is usually 25% down and a 12 month interest reserve. Also, credit plays a role, most will have a min score of 660 but may be able to grant exceptions between 600-659. Rates likely to be 10.75% - 11.75% for first timers. 

@James Frazier hard money lenders want to see experience, good FICO score (660+), liquidity (have enough for a 25% down-payment plus 3-6 months of payments in reserves), and a solid deal (where 75% of purchase + 100% of rehab = 65% ARV or less and with a project ROI of 20%+). I would be cognizant that most hard money lenders have a minimum loan amount of $75k - $100k, with fewer at $50k. The down-payment should come from you and not gift funds, another loan, or seller second.

@Stephen Foltin - hard money lender wouldn't lend you 100% of the proceeds. You could potentially find a private lender to do so but they usually only do this if you have an established track record. 

If you're using funds from your parents. You can purchase in cash and then do what's called a delayed financing/delayed purchase financing and pull the money back out. Usually you're able to do this within 30-90 days of a cash acquisition. The other option is to purchase in all cash and then do a cash-out refinance 6 months later.