All Forum Posts by: Raj Patel

It’s not the best but still worth investing in. Where else can you leverage your position higher? Where else can you invest once, and then starting buying income in other properties? 

Unlike REITs which lose value, RE will never lose enough value where your down payment is lost. Won’t happen. 

 I felt I didn’t need a broker for a simple cash out refinance but when you look at the bigger picture of the eventual purchase and go backwards to the cash out refi maybe it’s wise to use one. 

 So banks have multiple programs? My lender is one the top 10 national banks by assets (can’t reveal who due to privacy concerns). I thought it was a one size fit all situation? 

As in you apply for cash out refinance and they have Fannie Mae requirements checklist. 

I’ll dig deeper but I hope to get a 30 year term.

When I applied for a personal mortgage in 2021 I don't remember the underwriter caring about the outstanding principal amount on the commercial loan since it is through an LLC. In fact he gave me credit for income derived through the LLC including all add backs in excess of my actual cash flow distribution. Why would a commercial lender care about personal mortgage DTI?

But another lender in 2021 was unable to analyze K1s/P&L/Bank statements and reduced by loan eligibility by 25%! This was another bank but regional unlike the Top 10 bank I used for personal & commercial.

My other top concern is this even worth it? If I’m unable to use the $700k (out of $800k) to purchase $1.75M (40% down) RE what’s the point of even cash out refinancing when I have just 3 years left. 

I feel the best strategy is to work backwards and start with the purchase to see if it’s even feasible.

When commercial loan P+I is added to personal expenses in the overall DTI ratio do they give you credit for cash flow or the entire NOI in the income side of the hypothetical RE purchase?

Thank you. 

 

Yes it is both simple, and quite insanely complicated. Do you know what lenders look for? 

And are 30 year terms available? 

My goal is to purchase MF/MU in NYC with the $700k out of the $800 so at 40% down my budget would be $1.75M. 

Hi everyone. 

So still planning my next move with the expectation that I start this process around May 2nd week. Currently tied up with other things. 

I currently own a retail building I purchased years ago. 3 years left on the loan with a sub 4% interest rate. God's grace have had no problems paying PITI so far. Cash flowing positive. I was hoping to cash out refinance and come out with around $800k cash on hand post principal repayment. I feel this target can be achieved given recent cap rates sold in the area, and hundreds of thousands of dollars worth of renovations combined done by me the landlord (1 unit+exterior), and my amazing tenants who did gut renovations of their units.

The general rule of thumb is to use 3 lenders for cash out refinance right? My current bank, and possibly 2 others.

The current bank I’m wary of because they used a 10% cap rate at time of purchase for the appraisal which is Trenton/Newark/Mott Haven level bad. They claimed the appraisal was independent but I have my doubts. I had to put 35% down, and make up the gap which still leaves a sour taste in my mouth. Their 10% cap rate valuation was even less than the town’s market appraisal to determine property taxes. That’s virtually impossible given that the town goes as low as possible. They also did not allow me to dispute, and the seller on the other side did not want to compromise so I was left stuck in the middle. I will look for 2 other lenders who are also going to be comparable national banks. But the hope is the $800k will happen. 

I have a few questions about the cash out refinance side of the transaction. Besides LTV what other factors are considered? My credit score is 800+. Will they look at DTI? I have a huge personal mortgage (P,I,T,I) that currently takes up around anywhere from 25%-38% DTI depending on how you calculate gross income. Just w2 would be around 38%. Would a cash out refinance to a LLC factor into my personal DTI? When I purchased the building I had no personal mortgage so my DTI from the personal side was non existent. Submitting bank statements/liquid assets won't be a problem.

Thanks 

I know of someone who bought a retail property a few years ago. Retail in the sense that it’s your standard building with parking lot and retail tenants. 

The NOI at purchase was $90k.
The bank gave him a 10 year loan at 4.25%

His P+I was around $88,000 a year. 
DSCR ratio barely above 1.
He put 35% down. 

Yet the loan went through. 

The only reason I ask how is to gauge how much we read on the internet is ********? 

How much is just fear mongering with the hope of influencing people to steer them to your line of product? 

I’m also curious because I’m trying to plan out my purchase later this year, and exploring all options. 

Thanks. 

Funny enough my family is actually from Ohio. My grandfather immigrated to Cincinnati in the late 60s. My dad went to the University of Cincinnati. But I have reservations about the Midwest. They have such high cap rates there because the future outlook is bleak. High cap rates come with low occupancy too. I’m not saying Ohio is the next Michigan (which is a failing state). But Ohio is not the future either unfortunately. 

I mean cash flows are important but I can go without them too. But my main concern is it’s nearly impossible to cash flow with current rates in the Northeast at least for 2-3 years post purchase. And without cash flow lending options also become limited. 

But I understand your suggestion. The cure to high interest rates would be high cap rates, or higher % down. Not good either way in my opinion. 

Hi everyone,

Still planning my next move. 

I was looking to purchase either mixed use or multi family later this year. Budget anywhere from $2M (35% down) to $2.8M (25% down). 

These are the benefits I see: 

Mixed use

Retail space(s) brings in a long lease and stable income. Much easier to evict, and obtain rent due. Far less needed in landlord maintenance. No need for updating space later on as new tenants will do it themselves. Less chance of a tenant lawsuit. Negatives would be less in the expected rental income due to long lease. No guarantee in finding a tenant due to rise in E-commerce. 

Residential space would bring in more per square foot. Constant flow of tenants if one leaves and safe. Negatives would be maintenance issues, and need to update space as time goes on to bring in quality tenants and rent. Eviction much harder, and no guarantee of back rent due. Shorter lease terms causing anxiety.  And possible legal exposure from tenant. 

The logic is with a mixed use space you get the best of both worlds so I’m leaning towards mixed use. 

But with mixed use your loan options are mostly limited to conventional. You can't get DSCR. Conventional brings with it many challenges to get approved, and limitations.

Was wondering what everyone’s thoughts are? 

Mixed use would be in NYC 4 boroughs or northern NJ.  

 Thank you for your suggestion. Will look into small balance commercial lenders.

That's what I thought too because I read DSCR requires a ratio between residential and retail, and use appraisers for market rent to determine NOI.