All Forum Posts by: Nghi Le

Someone who doesn't have a strong, stable income (or even no income) would probably want to go towards the asset-based side, whereas if you have a strong W2, don't own too many assets, or the property doesn't cashflow well, the conventional route may make more sense.  Here's a comparison of the two:

It looks like you need to move to either commercial/portfolio loans (typically from banks), or towards asset-based loans.

Here's a comparison and the pros/cons between a conventional mortgage and a 30-year asset-based LLC rental loan:

I thought about creating one for commercial loans as well, but it's a bit harder to generalize since they each make up their own rules.  But it's often somewhere between conventional and asset-based, although with shorter terms and amortizations (which can affect your ability to cashflow and ultimately the loan amount that you can get).  I've also found that banks in general have been a bit unreliable since COVID; still waiting for them to fully recover.

So many different types of loan products mentioned in this thread. Conventional lenders will all have seasoning periods (and slow timelines), whereas commercial lenders/banks will be all over the place, but also generally have seasoning periods and slow timelines, and shorter terms and amortizations. You might be looking more for an asset-based loan; a lot of them have lower or no seasoning period, can go up to 75-80% LTV, with rates starting at 4.5% (but generally average in the mid 5's).

I can recommend some if you want to PM me more information about your scenario. The one problem I see upfront might be minimum loan amount since I know a lot of properties in OH (that investors look at) are worth less than $135k. Credit, LTV, cashflow/DSCR, experience, type of property, etc. also matter and would affect the terms you get.

@Joel Hutchinson @Ryan Howell

Those look like an asset-based loan (and the LendingHome one definitely is). Sometimes people call them commercial loans or non-QM loans. These days you can get down to 4.5% on the rate (with the average rate in the mid 5's) and up to 80% LTV on a fully fixed 30-year LLC loan. I think you can find something better.

Sounds like you need to move away from conventional loans/banks and move towards asset-based loans, which is what a few folks here have mentioned.  Here's a comparison of the two:

PM me some more specifics about your scenario and I can give you some recommendations.

Is it conforming or legally non-conforming (ie. grandfathered)? If so, I can take a look at it. The appraisal's going to be a headache regardless since there are rarely enough comps for it (if any) which makes a lot of appraisers pass on it, but it is generally doable.

Certain Lending provides 30-year loans to entities on 1-4 unit rentals. These loans are based on property cash flow, eliminating the difficulty of underwriting borrower income that is part of any bank loan (i.e. no tax returns, pay stubs, DTI issues, etc). There are no seasoning requirements to refinance, and fees are reduced when you borrow bridge money from us to acquire the property.

• Loan Amount: $100,000 to $750,000 (can be larger for portfolios); minimum property value of $135,000
• Loan Fees: 1.50pts + $1,495 (covers appraisal, processing, and underwriting)
• Interest Rate: Between 4.50% to 6.50%; average rate is around 5.50%. Rate buy-downs are available; get lower rates by paying more points upfront.  Or pay less points by choosing higher rates.
• Closing Speed: 3 weeks
  
• Minimum FICO: 680
  Loan Term: 30-year fixed rate OR 10-yr interest-only hybrid ARM
• Loan to Value: Up to 80% for purchase or delayed finance; up to 75% for refinances (including cash-out)
• Debt Coverage: Minimum 1.20 DSCR. The DSCR calculation is Rent / PITIA monthly payments, where rent is the lower of actual leased rent and market rents. For I/O ARM loans, ITIA payment is used (which allows you to qualify for higher loan amounts).
• Borrowers: Legal US entities, including LLCs, LPs, corporations, and trusts. Foreign nationals allowed.
• Prepayment Penalty: Standard prepay is 3-year stepdown (3-2-1). Reduced and no prepayment penalty options are also available.
• Lease Requirements: At least 12 months to a standard residential tenant; SFR purchases can be unleased.
• Payments: Monthly payments are collected by ACH. Taxes and insurance are escrowed.

We currently lend in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Maine, Missouri, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, and Washington. We can lend in other states if you have a large portfolio that needs funding. Rural properties are not eligible.

We also provide short-term hard money loans to acquire and renovate the BRRRR. Click here for more details on our short-term bridge and long-term rental products.

To get started, please complete a 5-minute submission at certainlending.com.

The question you're asking is more of a personal choice, i.e. risk tolerance. Some investors do like to put one LLC per property to completely separately the liability. But I think it's a little bit of an overkill (although with Series LLCs it makes it easier). My personal preference is about $250k worth of equity (not necessarily property value) per LLC. In CA where values are higher, this could mean one property, whereas in the midwest it could be 5 or 10. But it could also mean one free and clear property vs 5 leveraged properties. If the properties are in different states, then it could make sense to separate LLCs by state as well.

If you're going the HML/asset-based route, it doesn't really matter to keep rental income in one place. They don't tend to look at income from your other properties or tax returns. It might help if you're trying to maybe get a commercial loan or line of credit? But normally if lenders care about what other properties you own, they'll just ask for a real estate schedule.

@Ben Kniesly @Ned Carey @Kerry Baird @Cameron Tope

I have about 20 properties, but only two conventional mortgages.  The rest are either in a commercial or asset-based loan.  

Conventional is the best 30-yr mortgage you can get due to low rates/fees and no prepay.  But it's also the most headache to get.  As you know, the more properties you own, the more of a headache it is.  Plus right now it's just extremely slow; I'm in my 5th month trying to cash-out refinance a free and clear property in MO.  Each passing month I need to provide new bank statements, mortgage statements, etc.  It's very frustrating.

Commercial loans have some nice rates too, but still bank-like in that they want to see tax returns, PFS, etc. and qualify a global DSCR (which is not unlike DTI). I also hate that they rarely give more than a 5-10 year term (with < 30 year amortization). The shorter amortizations sometimes make it harder to meet their DSCR requirements.

The asset-based loans have been a blessing.  So fast and easy; it was almost like getting a hard money loan.  I closed in 2-3 weeks.  They didn't look at my personal income or care about the other properties I had.  And these are full 30-yr loans to LLCs!  The two biggest downsides here are the 3-year prepayment penalty and the higher rates.  Pre-COVID, I was able to get a loan at 4.75% interest, but nowadays it's looking like mid to high 5's.  Still, these are my loans of choice because of the time and headache factor... and closing confidence.

Like @Cara Lonsdale mentioned, try to build up your 2 years of self-employment income while you are still in your W2.  That way you still qualify for loans after you leave your job.  It's also good that you have at least two years of being a landlord (in order to count your rental income).

Alternatively, you can get 30-yr asset-based LLC rental loans; a lot of HMLs actually offer this. The rates will be higher (usually in the high 5's), but they are much easier to qualify for and don't care about your personal income at all (and thus no tax returns, pay stubs, etc); they only care about the cashflow of the subject property.