All Forum Posts by: George Despotopoulos

@Adam Soyak. Your best best is a Hard Money Lender. They are able to close within one week.

There are a number of hard money lenders out there that will give you a total loan amount of $160K. They will give you 80k upfront and another 80k to fix the home. That will bring your after repair value LTV to 66%. Be prepared to pay up because hard money lenders usually charge 10% in rate+ and a few points upfront. Some of the lenders to look into are: LendingHome, Lima One, LendingOne, Colony, Angel Oak Prime Bridge etc.

Once the house is fully renovated then you can think about getting a permanent investment property loan from another lender. There are a number of private lenders that will give you a longer term cash-out refinance loan on your rental properties. If you obtain a loan with a ~65% LTV, it gives you the ability to continue to build your portfolio and will actually increase your monthly cash flow because you will be able to buy more properties with your available equity.

Some important things to ask yourself about each property before pre-qualifying for an Investment Property Loan: a) is the DSCR greater than 1.25x for each property? Private Lenders offering this loan often review the actual property's rental income and not your personal income to qualify you for the loan b) How much are you looking for in terms of LTV? 60%? 70%? c) How quickly do you need to close? Private lenders often close within 3 weeks but usually charge a rate that is >6.5%.

@Garrett Jefferies

There are a number of private lenders that will give you a longer term cash-out refinance loan on your rental properties. If you obtain a loan with a ~65% LTV, it gives you the ability to continue to build your portfolio and will actually increase your monthly cash flow because you will be able to buy more properties with your available equity. 

I have always been a big fan of "healthy leverage" which is what you should be thinking about as you continue to buy more properties. I would suggest you look into obtaining a loan even though it is at a relatively low LTV.

Some important things to ask yourself about each property before pre-qualifying for an Investment Property Loan: a) is the DSCR greater than 1.25x for each property? Private Lenders offering this loan review the actual property's rental income and not your personal income to qualify you for the loan b) How much are you looking for in terms of LTV? 60%? 70%? c) How quickly do you need to close? Private lenders often close within 3 weeks but usually charge a rate that is >6.5%.

Good Luck and happy to help with any other questions. 

@Richard S.. We hear the same problem you face from other Real Estate Investors on a daily basis. You should not look at Hard Money lenders because they usually charge a 10%+ rate, 2-3 points upfront and the term of the loan is usually less than 12 months. Based on the details above, you should be able to get a longer term loan from a lender (i.e. 30 year loan).

If you are looking for portfolio lenders, you should look into Colony Capital and B2R. If you are looking for a single loan for each property you own, there are limited alternatives out there but we are diligently trying to change the landscape. 

Some important things to ask yourself about each property before pre-qualifying for an Investment Property Loan: a) is the DSCR greater than 1.25x for each property? Private Lenders offering this loan review the actual property's rental income and not your personal income to qualify you for the loan b) How much are you looking to get a loan for? 60% LTV? 70% LTV? c) How quickly do you need to close? These lenders often close within 3 weeks but usually charge a rate that is >6.5%.

Please reach out to me directly if you have any additional questions. 

Thanks 

@Mark Kao. Congrats on your success thus far. There are a number of private lenders that will give you a longer term loan on your rental properties. If you obtain a loan with a 60-65% LTV, it gives you the ability to continue building your portfolio and will actually increase your monthly cash flow because you will be able to buy more properties. I have always been a big fan of "healthy leverage" which is what you should be thinking about as you continue to buy more properties.

Good Luck and happy to help with any other questions. 

@Michael Ramsay. One of the most important things to consider when looking to get a longer term loan to finance your property is your property's rental income. Most lenders will usually look for a minimum 1.25x Debt Service Coverage Ratio and a tenant in place (lease agreement).

Good Luck. 

@Mark Allen. Welcome to BP...

One of the most important things to consider when pursuing a buy and hold strategy with SFR is your property's rental income. Lenders usually require a minimum of 1.25x Debt Service Coverage Ratio but on average you should target 1.5x. In addition, if this is your first property it is probably prudent to buy a property that does not require as much TLC.

Good Luck. 

@Christina Wrightsman. Congrats on your first rental property. Experienced investors frequently use an LLC to buy their rental properties. In most instances, investors that use an LLC have more than 1 rental property and look to acquire more.

Some things to consider before creating/using an LLC for Rental Properties: 1) Start-up costs for LLC 2) Yearly fixed fees for an LLC 3) Flexibility by Lender to provide a loan to rental property even though it is an LLC 4) Future plans? Looking to attract investors as partner in rental properties? etc. Remember that even though you may use an LLC for your rental properties, you will still need a guarantor for each loan.

Good Luck in your future endeavors.

Every market is different and every investor's preference is different regarding cashflow.  Most of the investors I follow on here won't do deals that don't cashflow, but it's possible to have positive returns on a deal where there's negative cashflow, as long as the home price appreciation covers it. Personally I would want cashflow unless you're really bullish on home prices in the market you're looking at and are confident enough to speculate on them.  

I'm not sure if a seller will be sympathetic to you trying to negotiate over cashflow. Some markets where price increases have outpaced rent increases are really tough to get good cashflow in. If there are other interested buyers at this seller's price, then the seller isn't going to care about your cashflow. That said, if their offer price is too high, maybe you can negotiate him down to get a good deal.

All in all, the advice I would give you is don't rush into a bad deal just because you have already started negotiating.  If there are better deals out there, don't be afraid to either walk away or negotiate further until the deal becomes good.

@Shannon Young I think the Ocwen program you're referring to is a Shared Appreciation Modification, not mortgage. Is that what you're asking about?

A loan amortized over a huge period of time isn't the same as interest-only.  Both are methods of reducing the monthly payment, but in different ways.  Interest-only means exactly what it sounds like - you make only interest payments for a certain amount of time (generally 10 years on a typical IO mortgage), and then you pay principal and interest for the remainder of the loan (usually there is no balloon).  A longer amortization period means you pay principal and interest every month, but over a longer period, so the monthly payments are lower. There may or may not be balloon period at some point (such as the 30-year point).

I don't know if there are rules on private lenders, but if this seller won't budge on price or interest rate, I can't see them being willing to amortize the loan over 50+ years. If they are willing, maybe check with a real estate attorney on whether there are any regulations against it.  I don't think there should be in a private financing situation, but I don't specialize in this field. 

One thing to be careful about - most lenders are going to charge you a higher interest rate for an interest-only loan or a longer amortization loan.  Depending on how much higher the rate is, you might not even be saving much on your monthly payment.  Just be sure to figure out exactly what you're saving and if it's worth it.

I agree with @Stephanie Medellin that mortgage lenders used to have 40-year loans, but those have been gone since around 2007.