All Forum Posts by: Sarah Barrett

Good Afternoon BP! I am new to this forum and am looking for some advice. I came from 12 years conventional business banking and now I run a Private Lending Division in Downtown Kansas City. What do you look for in a good lending partner? How do you recommend I get my name out there? How do I find leads? In addition to BP I am a member of MAREI and have joined multiple investor facebook groups.

Thanks!

Sarah 

DSCR loans are generally a commercial loan. In my experience they are a 5 yr. fixed, 25 yr. amortizing loan. I hear a lot of borrowers stating that they plan to purchase and then Quit Claim Deed to their LLC. As mentioned, not only does this mess with the chain of title and potentially expose you personally liable, but by Quit Claiming it to your LLC, you are defaulting on your loan agreement. If the loan was given to you as an individual, you cannot just change it to your LLC. Banks will audit county records to ensure that a borrower hasn't defaulted on their loan agreement and it can cause big problems down the road. DSCR loans don't usually have a door min/max but the property must cashflow at closing. A couple of helpful items for a DSCR loan:

DSCR minimum is generally 1.25X (this means that for every dollar in debt expense you must have $.25 left over in net income.)

Potential rents are not considered. The property must cashflow via rents and you will need to have a lease agreement in place or an intent to lease. (If the lease agreement is month to month, some lenders will require that your tenant sign a new lease)

If a multi-unit property, it must be at least 70-80% occupied

If historical financials are not provided by the seller (i.e. maintenance, capex, ins. and property management fees) Most lenders have their own pro-forma standards which are generally MUCH higher than actual expenses.

Ask your lender for all the above information requirements. If they won't provide their underwriting metrics, walk away.

As a hard money lender with 12 years in commercial banking, hard money is the easier process. Closing time is usually a couple of weeks vs. 45 days for conventional lending. Banks will not finance the rehab and require that the property cashflow at closing. This makes it almost impossible for borrowers to fix/flip or invest/rehab. Traditional bank rates are much lower than hard money and offer 80% LTV on purchase price but hard money lenders look at the asset and lend based on after renovated value.