All Forum Posts by: Riaz Gillani

DSCR = Debt Service Coverage Ratio which is a measurement of the cash flows of the property. It therefore stands to reason that a DSCR loan is a type of debt financing where the cash flows of the property are used to do determine eligibility rather than the individual credentials of the borrower. They are generally 30 Yr Loans (Fixed, IO, ARM, etc.). No blow up / no term renewal. No Income Verifications. No DTI. Ok if you are self-employed. LLC is ok (preferred at times, even). 

Credit must be checked but can be as low as 640 in most cases. Possibly even lower.

Main drawbacks would be marginally higher rates (50-75 bps higher), always some kind of prepayment penalty, and because the asset is the primary function of the loan - a non-cash flowing property (maybe lux or bad market) may not qualify. There may be more but that's a good primer. 

Unlikely on earning any additional value for the countertops. Appraisers simply ask themselves if the property condition is up to par with comps in the area and this is a question that harms you more than it helps you. If yes - there's unlikely to be any adjustments. If no - you may see an adjustment to lower the value of your house to reconcile with the comps. So don't over renovate. 

Re: thinking the countertop was actually granite, unlikely. But even so, unlikely to increase your value on a refinance (see above). On a flip maybe because a buyer might pay more. 

For a refi, make a decision on durability and cost for the counter tops. Especially if this is a long term hold ...

Where there's renters there's a potential to brrrr!

As for STR, you're generally going to want to be looking for one of three markets: (1) Destination Markets -> Think Hawaii or Malibu or Aspen (2) Industrial Markets -> Think Austin, Greenville, Atlanta (places where tourists don't contribute to the better majority of all dollars spent or (3) Vacation Markets -> Areas with a good mix of tourists and long term residents and the vacation goers don't need to book their trip that much in advance.

A bridge cash-out refinance can be a suitable choice here. But your father would not be allowed to live in the property and you'd not be permitted to use the cash out proceeds to pay off his car or credit card debt (only business / REI expenses). So more so ideal for renovating the property and converting its use to business purposed.

Someone also mentioned a reverse mortgage - a good idea if you don't go the STR route and instead want to supplement your father with income by tapping into that equity.

 A 50/50 split is most typical for a flip with a capital and day to day partner. A hold can be a little more creative. If this is your first deal with this partner and it went relatively well (aka you'd like there to be a second, third, so on ...) then try to reimburse the cap partner with as much of his initial investment as possible...After that you can pay split the cash flows 50 / 50.

If there's a very healthy amount of equity in the deal - consider paying him a return on his initial investment in exchange for a greater percentage of the asset. 

For ex) a $100k initial investment. Gets paid $110k on the refinance. Equity split is 60 / 40. 

@Andrew Postell put it best. Reach out to local lenders who can make decisions based on you + the asset with little to no institutional lag. BP Forums or google something like 'Colorado REIA' is the best starting point. In both cases you'll get an authentic opinion on the services. What you do NOT want to do is search 'Lenders who can close fast' - if you get lucky this can work but the more likely scenario is that you just get the lender who pays the most for SEO ...

You may also want to explore seller financing. It's especially likely / plausible when buying a property that was previously used for rental purposes (B2B). 

I suppose you're alluding to the fact that there are additional rules? Sure ... but to say that it is not legal is misleading. I've stayed in them (and met phenomenal hosts as a result) and I've financed them. See link to article: https://www.curbed.com/2022/05...

Has anyone else noticed an increase in properties that were previously used as an STR for sale? (often times with the furniture included)

Normally I'd default to inflation and subsequent market uncertainty. And that may in fact be the cause. But, with the chance to make 4x what an LTR would otherwise make ... there must be something else brewing.

Now consider this: NYC currently has more Air Bnb listings than it does apartments for rent - putting a downward pressure on daily rates even though home values continue to increase. 

To me it feels like too many people jumped into STR, underestimated the difficulty in making it work in a reproducible way and had one of those harsh learning experiences.

If this is true - where do we go from here? Would you consider buying an STR property that was previously unsuccessful? How much stock do you place in your / your team's ability to increase reservations?

What kind of loan do you currently have on the dup? Is a second position / HELOC allowed? If not, have you thought about refinancing the duplex into an LLC to take the mortgage out of your name? That would help your DTI

Few acceleration clauses trigger automatically. Instead, after the conditions in the clause occur, the lender may choose whether to invoke the clause. In the scenario you posed, a full-gut Reno without the lender's prior approval would generally put the borrower in default due to waste / destructive use of the real property. But, where a lender gains the right to invoke an acceleration clause due to a borrower’s default, the lender may lose that right if the borrower corrects their default before the lender invokes the clause.

Also worth noting that given the loan is still young and depending on the LTV, the lender could lose a good sum of money by taking legal action and foreclosing. So, while a drive-by is highly unlikely - act quickly for your and your lender's sake.