All Forum Posts by: George Despotopoulos

I recently bought a rental property in a different city (across the country), and so far the process has gone pretty well. I use a property manager, and personally I would recommend doing that unless you have a friend nearby who has experience with rentals and would be willing to help you out. It's important for me to know that there's someone local that the renter can call in case there are any problems or emergencies with the property.  

If you're worried about expenses, I would expect most property managers to charge you around 10% of the monthly rent.  There is also a fee to actually market and rent the property for you. If you're trying to save on costs, you could try to do this part of it yourself before you move away (as long as your able to be there and show the house/unit to people). However, you said you're an engineer, which I'm sure keeps you busy - I'm not sure if you want to be spending your time marketing your unit and scheduling showings.  It's also good to have a professional do that and help with the lease agreement. Also, i'm not sure about this, but some property managers might want to be part of that process, because they might want to be involved in vetting the new tenant (and this is also where they make some of their money).

If you have to move for work, will your employer be helping out with your housing costs in your new location? If that's the case, I think you can definitely justify the added expense of a property manager. It will make your life and your transition to the new city a lot easier.  Just find a good property manager who cares about your and your property, is knowledgeable and experienced, and who you trust.

@Joe Campbell if the credit union doesn't work, there are lenders out there who specialize in rental properties and would be happy to lend to an LLC. The rates will probably be higher (6-8% range) than at a bank or credit union, but lower than a hard money loan (which would likely be >10%). Some will underwrite your loan by looking at the rental income generated by the properties instead of looking at your personal income. They may require a personal guarantee by you and/or your partner in the LLC, so I'm not sure if that's a dealbreaker for you.

@Account Closed are right that you are unlikely to qualify for a "traditional" mortgage without income. However, there are non-bank lenders out there who will look at your property's income, not your personal income. As long as your rental produces enough net income to cover the mortgage, you could qualify for a loan even if you don't currently have any personal income. You would still need to contribute to the down payment, but in your post you said you plan to put at least 50% down, which should be plenty. Hope this helps!

@Eddie T. thanks for the feedback, all very helpful info!  You're right that we do plan to package our loans and sell to investors, and I agree with you that a shorter loan is more attractive to them.  I like your idea of a 10-year balloon, so we're going to look into that.

I totally understand where you're coming from on the multiple closing costs thing. We'll have to look into a portfolio product for investors like you who own multiple properties.

We don't plan to offer lines of credit - I think it would be tough to compete with banks on that product...i agree it's a good option for investors who own a property free & clear, just not our bread & butter.  

Thanks again for connecting and for your thoughts!

@Eddie T.Our minimum is $50k, but it's possible to grant exceptions if there are compensating factors, such as a higher percentage down payment.  We don't currently offer a 10-year balloon product, but it's an interesting thought.  Do you think borrowers just prefer a shorter loan than a normal 30yr, or is there another reason they would prefer a 20yr amort / 10yr balloon?

We don't offer portfolio loans, but we allow for multiple loans to one borrower, so your LLC could take a different loan for each property.

Are your properties in New York? If you'd like to connect to have a more detailed discussion, my email is in my signature. 

@Eddie T. thanks for checking out our site.  You're right that we offer a loan product similar to Lima One's. We do offer a few additional loan options, such as adjustable rate loans and shorter-term interest-only balloon loans.  We're also trying to differentiate ourselves by putting the entire application and underwriting process online, helping borrowers close quickly and easily. 

Have you worked with Lima One on their rental loan products? We'd be open to any other feedback, comments, or questions you have.  Thanks for reaching out.  

@John Jacobus - I think it's great that you're thinking about this. We've been working for the past few months on starting up a mortgage lender to focus on rental property finance (one of the niches you mentioned).  I agree with @Chris Mason that you need to be able to continually turn over your capital, but I don't think we should automatically assume that the loans you make with be non-saleable.  There are investors who will buy non-traditional mortgages, but typically they will want to buy them bundled together in packages of at least a few million dollars.  This means you'll need a good amount of capital to start out, and you'll need to be efficient with your capital markets effort in selling your closed loans so that you can keep lending.

To try to answer your questions more directly, in my opinion the biggest hurdle is capital.  Lending is a very capital-intensive business.  It is possible to get financing from banks, such as a warehouse line, but typically they won't want to go through the effort of giving you a line unless it's at least $5 million.  And they aren't going to give you $5 million if you don't a) have some of your own capital and b) have at least enough of a business and track record to make them comfortable that you can operate your business and pay back whatever they lend you.  

If you'd like to connect directly on this, feel free to shoot me a message.  We're located in NYC as well, so we'd be happy to connect and discuss more about this with you.  

Are you acting as your own registered agent? (Disclaimer: This is not legal advice-- I do not practice in CT)  I believe for registration purposes, a business address must be a legally valid address—that is, a physical address. So if you go the PO box route, you would need to ask the for a real address rather than a PO box.

That's awesome...I love the show Tiny House Hunters on HGTV. I'm always amazed at the ingenious ways space-saving designs. Best of luck with this! 

Hi Courtney - sounds like you have a great project going there. If you decide to hold it as a rental, check out our website at www.mofinloans.com. We're not lending in GA just yet, but we plan to roll out there within the next few months. We offer cash-out refinances up to 70% LTV and we underwrite based on the property's income, not your personal income. Hopefully we can help you out once you get it rented!