All Forum Posts by: Patrick Roberts

Quote from @Rocio Zamora:

Hi, Im a 10+ yr RE investor. I would like to get in touch with lenders in the SC market for purchasing and refi transaction.

Contact me for details.

Thanks

If you're not already familiar, look into property taxes closely for SC investment properties. Theyre not taxed the same as primary homes - typically the tax rate is 3x higher than what the previous year taxes show unless it's already not being used as a primary home.

These sound like issues that prevent the delivery of clear title. Changing lenders is unlikely to help. For the unrestricted access/road issue, this is usually spelled out in the easement that is attached to the deed and references the CCRs. If none of that and the HOA stuff is in place yet, very few lenders are going to touch this. It affects the marketability/value of the property.

Title issues are not my specialty, but these have been deal-killers for me in the past. I had a knock-down, drag-out fight with an HOA on a VA condo purchase loan late last year over an HOA bylaw issue. It was a very minor issue regarding the pre-sale process that had expired 20 years ago. Finally got a waiver from the VA, but it nearly killed the deal and took almost 7 weeks to close.

Maybe someone with title knowledge can provide better insight. 

Ive been on the fence about this as well. Curious to see what others think.

The points and prepays are where conventional will diverge from DSCR. Most DSCR loans will have 3+ year prepays and usually around a 0.5-1.0 more in points than a comparable conforming loan.

Quote from @Jason Duet:

Thank you for the quick responses to my post. It is good to know I'm not completely out of line for having the doubts I have about the "just get started and fail your way to success" mindset.

@Patrick Roberts to your point about risk tolerance, I think that pretty well describes me. I think I have a healthy risk tolerance, I just like to have a game plan when I take action. I have a number in my head after the showing I went to today, but the wholesaler's number and mine are not close. If I gave my number and got it accepted I'd still be nervous, but I'd definitely pull the trigger on the deal.

I feel I'm being reasonably cautious without having any recent comps and because the one house in the neighborhood currently on the market is about $15k below his estimated ARV despite being slightly larger. It's just that I see how far off we are and, being inexperienced, am naturally inclined to think I'm being too cautious. But I will stick with my gut on this one and keep networking and looking for the next one.

Yeah I basically never give any merit to what a seller estimates the ARV at. I run my own analysis and then put a range around that number for a sensitivity analysis. One of my core questions is "how far off can I be without getting into serious trouble on this?" I tend to err on the conservative side of that to have a margin of safety. The caveat though is that this kills a lot of potential deals that are marginable. I prefer quality over quantity, so Im ok with this.

Quote from @Jason Duet:

Hi everyone!

Longtime member of the BP Forums, although it's been several years since I lasted actively participated. We're finally in the position to be able to move forward with our goal of running a fix and flip business, but as anyone reading this surely knows, building up the courage for that first step has stopped so many would-be investors before they ever got started. We've taken the time to try to educate ourselves as best as possible, but know that nothing can happen without eventually taking action. We have our first inspection of a potential investment (deal from a wholesaler) today, so I feel like that is a step forward. But as someone who tries to be as prepared and have as many questions answered as possible, I just cannot get past the doubts regarding the deal (there are just not any real comps, which in itself also causes me concern).

For all of you successful investors out there, how many deals did you have to analyze/inspect before you finally ended up pulling the trigger? I've heard a lot of investors on podcasts describe the considerable amount of risk/leveraging they undertook on their first deal. Although many investors never get started due to analysis paralysis, considering that even the most experienced investors have had a deal or two go south, I wonder how many investors also end up never finding success because of a mistake on their first deal.

 Survivorship bias is a real thing - glad that you're seeing that. You tend to only hear from the people who survived (were successful), not from the ones who tried and failed miserably. 

There will always be discomfort and fear of the unknown. If you feel that youve been thorough in your due diligence and have eliminated/mitigated as much risk as possible, then then the feelings are just discomfort that must be pushed through. 

All profit comes from risk - you will have to take risk to get anywhere, and risk implies the possibility of an unwanted outcome. If you have reduced the risk as much as practical, feel that the potential upside is sufficient for the risk that you will take, and have the ability to bear the risk/survive a bad outcome, then it's time to take a swing. If this is still too much to stomach, then it's time to find a less-risky activity. Everyone's risk tolerance is different and there is nothing wrong with that.

If you havent been as thorough as you know deep down that you should, then the fear is a self-preservation instinct and you have more work to do. 

The BR market has slowed a lot but there is still activity and decent deals. If you've got more than one viable exit strategy and a reasonable margin of safety, you'll likely be fine. 

Compliance-wise, this would not be owner occupied so a lot of Dodd Frank goes out the window. From an underwriting perspective, I wouldnt do this without a PG and a solid workup on the members/operators to understand who they are and their background. Most KYC/AML will still apply. I would also get a copy of the articles of org and operating agreement to verify that the members have authority to dispose of assets, borrow, encumber, etc. Make sure the entity is in good standing with the State - I could be wrong on this, but I believe some states have issues with allowing a UCC to be filed on an entity that is not in good standing. Also, watch the state in which the entity is domiciled - some states like NV, CA, WY, and the Dakotas can complicate matters.

Some other documents for NOO/investment properties that I would want are a collateralization of leases/rents and an affidavit of non owner occupancy. Title policies will likely be long form instead of short form, so you'll want someone knowledgeable on your side to look over the exceptions for any landmines.

I'd recommend a background check for any other entities owned by the members with a history of BK, tax liens, etc, and for any UCCs/tax liens currently filed against the entity. IRS liens/UCCs are particularly concerning. I've havent personally seen an IRS UCC foreclosure directly but have been warned by people who know their stuff that this could potentially prime the mortgage, so IRS filings for the sponsors/members, the entity, or any other correlated entities are a hard-decline for me (unless there's an installment plan and situation that makes sense). If there are any non-tax UCCs filed on the entity, make sure Title is aware/has the info (shouldnt impact the title policy, but you never know).

For the mortgage, I would be more aggressive with the covenants/agreements since this an NOO entity borrower - provisions for cross-default, financial and management performance requirements, change of entity management/ownership, minimum capitalization, etc. Depending on who you ask and the state, a confession of judgement/executory process may or may not fly. I've received conflicting advice on that. A lot of this will vary by state.

I'm not super knowledgeable when it comes to trusts, so I cant really speak to that part. 

Quote from @Chris Seveney:

Quote from @Peter Walther:

If I'm understanding the situation, a CFD from a former owner to a third party was recorded after the former owner was out of title. Was the CFD entered into after the conveyance or was it prior to the conveyance and entered into before? Did you receive a title search or a title commitment? I've seen people rely on a last deed of record search which wouldn't have found the out of chain deed. In either case, as part of your due diligence do you have someone knock on the door to confirm who's in possession?

So a prior seller name him Chuck, sold his property via CFD in 2019 to Sally. Sally was living in the property and making payments from 2019 to summer of 2024. In March of 2024 Chuck sold the property to a LLC (who lets say was barely old enough to drink) via a warranty deed and they received financing from LENDER. At some point Chuck convinced sally she needed to move out and sent eviction notice even though she was paying. She did not know better so moved out and got an attorney and kept putting her monthly payments in escrow and had her attorney record the CFD.

Fast forward to today where the LLC has never made a payment on the loan and the LENDER is selling the loan. On the lenders title policy is an exception "Rights of claims of parties in possession not shown by the Public Records" which Sally was in possession of the property at the sale and the seller was basically fraudulent.

 Just...wow. Did the lender have some idea of what was up, choosing to sell the loan rather than try to cure/foreclose?

Quote from @Eduardo Cambil:

Quote from @Patrick Roberts:

Quote from @Chris Seveney:

Quote from @Eduardo Cambil:

Looking for Hard Money Lender for $50K or Less – 10-30 Year Mortgage?

Hey BiggerPockets Community,

I’m on the hunt for financing options for properties priced at $50,000 or below, and I’m running into some roadblocks. I’m hoping someone here has insights or recommendations!

What I’m Looking For:

• Loan amounts $50K or less
• 10-year or 30-year mortgage terms (not just short-term fix & flip loans)
• Ideally 100% financing or very low down payment
• A lender that finances buy-and-hold rental properties

What I’ve Found So Far:

I’ve come across a few lenders like RCN Capital, EquityMax, and some credit unions, but they either:

• Have high closing costs ($3K-$5K+ on a $30K loan, which is crazy)
• Only offer short-term hard money loans (12-24 months)
• Require large down payments that don’t make sense for small deals

I’m open to hard money lenders, DSCR loans, or any creative financing solutions that could work for these lower-price-point properties.

Questions for You All:

• Do any hard money lenders offer 10-30 year terms on $50K or lower loans?
• Who’s financing buy-and-hold rentals at this price point?
• Any strategies to reduce these insane closing costs?
• Have you successfully borrowed at this price level? If so, how?

I’d love to hear from investors who have tackled this issue before. Any referrals or experiences would be super helpful! Thanks in advance.

Looking forward to your insights!

 BRUTAL HONEST RESPONSE:

You are not going to find a 100% financing loan for under $50k. Most buy and hold rentals are $75k min if you go DSCR route, some local banks can go that low but tehy are not going to lend 100% as their charter will not allow them too unless its a special government sponsored loan program and that is for owner occupied only - not for investment purposes.

@Chris Seveney is on the money. Also, true loan origination costs (not points), such as processing, legal, underwriting, appraisal, credit reports, etc are largely fixed. Processing a $50k loan is almost as much work as a $500k loan, so the costs passed through to the borrower are the same. Same goes for Title - while title policies may be cheaper, the recording and other fees are the same. The result is that you're going to have loan costs similar to most other loans. 

Additionally, because the loan is so small, the yield relative to the work is lower, so youre going to get hit with points up front and higher rates to make the loan profitable enough to be worthwhile. This is why so few lender go below $75k - too much squeeze for the juice.

Another issue is the collateral itself - most properties in this price range are basically niche, depreciating assets. They are difficult to liquidate and rehab/turn costs are relatively high compared to the property value if taken back as REO. Between the disproportionately high amount of work and overall risk given the yield, most lenders just avoid this range altogether.

Long story short, what youre looking for doesnt exist. Youre going to have to adjust your expectations.

That makes a lot of sense, and I completely understand why lenders avoid these smaller loans due to fixed costs and lower yields. The numbers just don’t work in most cases, which is why the closing costs feel disproportionately high.

That said, my goal is to leverage debt to scale quickly, rather than using my own cash on each deal. If traditional lending isn’t viable in this price range, I’m open to creative financing strategies.

Do you (or anyone else here) have recommendations on alternative approaches? Maybe:

• Portfolio lenders who would finance multiple low-cost properties under one loan?
• Local banks or credit unions that might be more flexible on smaller loans?
• Seller financing or private lenders who would work in this price range?

I appreciate the insights—just trying to figure out the best path forward for these kinds of deals!

 I have seen a local credit union finance one of these in Sumter SC, but I cant speak for your market. The deal I did see was a commercial loan with a 10% note rate, 25% down, and 15 year Am. Seller financing or private lending may be an option, but you'll have to find someone comfortable with the collateral. I personally would not lend my money on a $50k house for all of the reasons I listed above about the collateral - just too much work and risk for the small amount of yield. I dont know that a blanket/portfolio loan would solve the problem, either, as it would just amplify the inverted economy of scale - even more work for the same ROIC. 

Quote from @Chris Seveney:

Quote from @Eduardo Cambil:

Looking for Hard Money Lender for $50K or Less – 10-30 Year Mortgage?

Hey BiggerPockets Community,

I’m on the hunt for financing options for properties priced at $50,000 or below, and I’m running into some roadblocks. I’m hoping someone here has insights or recommendations!

What I’m Looking For:

• Loan amounts $50K or less
• 10-year or 30-year mortgage terms (not just short-term fix & flip loans)
• Ideally 100% financing or very low down payment
• A lender that finances buy-and-hold rental properties

What I’ve Found So Far:

I’ve come across a few lenders like RCN Capital, EquityMax, and some credit unions, but they either:

• Have high closing costs ($3K-$5K+ on a $30K loan, which is crazy)
• Only offer short-term hard money loans (12-24 months)
• Require large down payments that don’t make sense for small deals

I’m open to hard money lenders, DSCR loans, or any creative financing solutions that could work for these lower-price-point properties.

Questions for You All:

• Do any hard money lenders offer 10-30 year terms on $50K or lower loans?
• Who’s financing buy-and-hold rentals at this price point?
• Any strategies to reduce these insane closing costs?
• Have you successfully borrowed at this price level? If so, how?

I’d love to hear from investors who have tackled this issue before. Any referrals or experiences would be super helpful! Thanks in advance.

Looking forward to your insights!

 BRUTAL HONEST RESPONSE:

You are not going to find a 100% financing loan for under $50k. Most buy and hold rentals are $75k min if you go DSCR route, some local banks can go that low but tehy are not going to lend 100% as their charter will not allow them too unless its a special government sponsored loan program and that is for owner occupied only - not for investment purposes.

@Chris Seveney is on the money. Also, true loan origination costs (not points), such as processing, legal, underwriting, appraisal, credit reports, etc are largely fixed. Processing a $50k loan is almost as much work as a $500k loan, so the costs passed through to the borrower are the same. Same goes for Title - while title policies may be cheaper, the recording and other fees are the same. The result is that you're going to have loan costs similar to most other loans. 

Additionally, because the loan is so small, the yield relative to the work is lower, so youre going to get hit with points up front and higher rates to make the loan profitable enough to be worthwhile. This is why so few lender go below $75k - too much squeeze for the juice.

Another issue is the collateral itself - most properties in this price range are basically niche, depreciating assets. They are difficult to liquidate and rehab/turn costs are relatively high compared to the property value if taken back as REO. Between the disproportionately high amount of work and overall risk given the yield, most lenders just avoid this range altogether.

Long story short, what youre looking for doesnt exist. Youre going to have to adjust your expectations.