All Forum Posts by: George Despotopoulos

@Tom Degroodt you can do a 30 year fixed cash-out refinance and keep it in the LLC (or transfer it to your personal name, whatever you like). You can go conventional or to a community bank/credit union or you can check out what non-bank lenders have to offer. Right now, a 30 year fixed rate, with 5 year prepayment penalty @ 75% LTV could be as low as 4.75% - 5.125% w/ a non-bank lender. It depends on the property's location, value, property's income/cash-flow, and your credit score.

@Jacob Claxton from a liability standpoint, it's most likely best for a real estate investor to invest through an entity. It provides a bit of protection. Most HML will require this as well. Private loans aren't the same thing as hard money loans. Private loans are usually a bit more attractive but difficult to get unless you have experience or someone in your network willing to lend to you. You can form an LLC as you go through the underwriting process for a hard money loan.

@Matt Ruttenberg in addition to convectional or portfolio lenders, you could look to a non-bank lender that may be the most flexible and easy to work w/ out of all options. But, it comes with a cost: slightly higher rates & fees. The problem with a short-term rental though is that it's tough to determine/figure out the income producing potential of the subject property. There are things like airdna but they've not become widely accepted in the industry. Typically lenders want to see 6-12 months of income as a short-term rental to be able to do the refi. With that said, you may have some luck getting an exception on this requirement w/ a non-bank lender (also known as a hard money lender, investor cash-flow lender, DSCR lender).

@David Jackson can't really opine, I've never dealt with them and don't know anyone who has. But, they seem to either be a broker or an outfit that table funds -- nothing wrong w/ either (and also I could be wrong, just making an assumption based on their materials). 

The good news is that there are a bunch of direct lenders for investment properties. You have quite a few to pick from and it's easy to get a quote. I would look to work with a lender that provides a quote based on a bit of diligence. Not much substance to a quick quote, those terms tend to change by closing. 

Your property's location & value should get you attractive terms. Feel free to reach out w/ any questions.

Anything above 700+ is great for investment property loans (I would say 680+ works in most scenarios). 

All you need is to have a property identified and work out your rough numbers like purchase price, rehab budget, and ARV. You bring that to a lender. They'll review and give you terms. If you want to move forward then the lender orders an appraisal where they'll get the as-is value and the ARV. If the numbers come in as projected then you'll confirm the loan terms with your lender and close on the deal. If you renovate and then decide you want to hold and not flip, you can go back to the same lender or another and discuss a refinance. You'll get some terms and a breakdown based on the figures of the deal. Then the lender will do another appraisal to get the as-is value.

Just an FYI, I think most hard money lenders would like to be @ 15% - 20% for a first time investor. There's also typically a liquid reserves requirement of 3-6 months of loan payments and that you have 10% of the rehab costs. This may be on the more conservative side of hard money but it's just something to factor in when trying to see what you can do w/ $100k. 

Another thing, if you're getting 10% down, that doesn't factor in closing costs and any other costs associated with financing (processing fee, underwriting fee, origination fee, appraisal fee, etc). This will vary lender by lender but most will have some sort of fees attached to their loans, so it's not just 10% of purchase price that you'll need to account for.  

Hey @Gabriele Uberti-- welcome!  We're active in the Orlando/Jacksonville markets. Hope to connect sometime soon. 

Hey @Dustin Livingston a few questions:

• Where is the property located (what city/state):
• When did you purchase property (month/year): 
• What's the current value (estimated):
• Is it currently rented w/ a 12 month lease? 
• What's your credit score (estimated)? 
• How many units is the property?

The answers to the above questions will help inform us what's possible. Feel free to reach out. 

Hi @Eric Wiinanen

With purchasing the next house, will an underwriter use the potential rent income as Income? Given that you're not meeting the DTI ratio, a non-bank lender that looks at the property's cash-flow (based on the market rent) is the way to go. The difference between this type of lender/loan product and a bank will be in process, underwriting requirements, rates, and fees -- so basically everything except that you'll be able to get a 30 year fixed. So to answer your question, yes, this lender will use the potential rental income. They will figure out what the DSCR (debt service coverage ratio) is on the property. That's achieved by taking the Gross Monthly Rent divided by the monthly loan payment of principal, interest, taxes, and insurance (as well as any dues). The gross monthly rent is provided to the lender by the appraiser. They will do a market rent analysis to determine what the monthly rent for the property you're buying is.

What is the process to do that since there wouldn't be any current lease, past rent history, etc.? How would you approach this? I answered that above. But, again, if there's no lease that should not be a problem. When the lender orders the appraisal, they'll request an additional form from the appraiser, which is the market rent analysis. The appraiser will get comps for both the value of the home (sales comps) and the market rent (rental comps). When you start looking at properties, you'll have an idea of what you expect it to rent for (based on other similar listings in the area). You'll get that to the lender you're looking to get a quote from. 

You can reach out to any non-bank lender (DSCR lender, property cash-flow lender) and informally run through a scenario. They'll be able to provide you with a quote pretty quickly. 

It sounds like George works for a place that has a big LLPA for loans under 100k, at least it seems that way based on what he's said above. Not all lenders have that adjustment, LLPA stands for Loan Level Pricing Adjustment. -> I don't self promote here but I co-founded a lender, we've been in business since 2015. I was a Real Estate attorney working w/ buyers/sellers & landlord/tenants as well as emerging businesses & start-ups prior to starting MoFin. My partner worked in mortgage-backed securities. We have ties to the capital markets and institutional loan buyers. Adjustments for loans under $100k are an industry standard in our space of non-bank lenders, hard money lenders, investor cash-flow / DSCR lenders, etc., however you want to label it. I never alluded to what the adjustment is but if you'd like to know, it is 50 basis points, seems the same as yours, but, important to note, in some scenarios we have no adjustment-- and both (no adjustment and 50 bps) are at max LTV.  

One of the tough things when talking about loans is people start to say things without building a context.For instance, George mentions a cap of purchase price plus costs and then in the next sentence mentions "hard money" lenders. It's not clear what guidelines he's talking about is it? Is he talking about guidelines from a certain hard money lender when he's referring to "purchase price plus cost"? What types of loan programs is he talking about? Conventional guidelines make no mention of costs in the selling guide when referring to the maximum cash out. --> I thought it was clear by saying "hard money/non-bank lenders". That's the program I'm talking about. Never alluded to or made mention of conventional guidelines or programs. Pretty sure saying hard money is what's considered context. Let me know if you disagree.

The scenario that George suggested with you paying closing costs twice is a whole lot more expensive than the very small adjustment you'll see comparing the difference of a 100k loan and an 80k loan. So, you can see how different people give different advice based on what they have access to or knowledge of. George maybe doesn't know that from someone like me the adjustment between an 80k loan and a 100k loan is only 50 basis points on the same rate. --> I work strictly with real estate investors. Regardless of the volume they're doing, to the majority, every dollar counts. Most, if not all, do bridge financing for the purchase + rehab and then a 30 yr refi once renovated & rented. That allows them to get the most cash back in the quickest time frame (75% ARV in 3 months)...Most investors I've dealt with in the last 6 years don't want to be capped @ their cost basis bc they're leaving cash in the property-- and again they want to max out on what they can pull from their asset. I also didn't suggest anything. I let the individual know of the different options/alternatives they have in the hard money space. I noted that it would be two sets of closing costs and that's a downside to doing a bridge and then a 30 yr refi.