All Forum Posts by: Burt L.

Hi again BP,

I have an associated thread inquiring about DSCR lenders and have contacted all those lenders mentioned by posters to that thread and much appreciate the contributions.

What I am learning is that Portfolio/Private lenders don't have to make the same disclosures that lenders who resell to Fannie/Freddie must  make. There doesn't seem to be a GFE, Good Faith Estimate or TIL, truth in lending statement required. I've already had a conversation with a lender whose rate has moved up 50 basis points in the few days since we last spoke after telling me his rates rarely move at all. 

As this area isn't so regulated, how does one actually receive the" benefit of their bargain" if after committing to a loan, the different figures begin to drift those those understood as the agreement?

I understand one should do a rate lock at the time of application but how is the Private Lender also locked into the agreement without the required disclosures that regulated lenders must comply with? It still seems to be wild-west like. 

Nobody wants to be in a 4-6 week process only to learn the terms have changed on your very largest rental expense - when you're down to the wire - but those changes won't be to the borrowers advantage. I have also read of people doing multiple-applications as something of a safeguard. Of course you have to pay for multiple appraisals at a high rate so that would be costly insurance yet still not very assuring. 

How do investors protect themselves on a DSCR loan?

BP Nation,

I keep reading again and again how important DSCR Loan Brokers are, but have been unable to find one by searching.

How can I find one - I'm in Colorado but know there are many national DSCR lenders.

The 4 unit property is a LT hold, with with Cash-out after the approaching completed fix. Where can I find these apparently elusive creatures? I also read of the conflict of multiple credit inquiries for a mortgage will hurt your FICO, or conversely that you can have many inquiries for the same item, within a 2-3 week period. Using a mortgage broker would also seem to keep credit inquiries down as a more pin-pointed application process. 

Thank you,

I've worked to follow the Info Template above:

I had a good year in 2017 and when time to pay the rest of the taxes in 2018 and after getting a call from a motivated seller, I instead made an installment agreement with the IRS and bought that initial Colorado 4-plex on owner-carry for $800K using that $50K earmarked for the IRS - for the down payment. I used credit cards to do the remodels and have high credit usage and which balances I still have, of about $80K. There are student loans of $60K, currently in government remission. 

I owe $717K on that owner carry, at 5.5%. If I were to split the side-byside fourplex into separate legal descriptions - townhomes - they would sell for $1.65M or a little more, but I intend to hold and assured the seller that I wouldn't sell and pay him and he get his whole tax bill with one whack. Due to the credit card balances my mid-score is a 680. This initial property cash flows $2500 per month. I am also behind on the property taxes as it seemed a relatively low interest rate compared to the credit cards. If this fourplex were sold as one legal description, then likely worth $1.2-1.3M as that is how a lender would value them in a combined (foolish) sale. The higher values as separate legal descriptions were clear from the outset. 

In addition to wholesaling, I also do condo-conversions, parcel reconfigurations, zone-lot amendments, and re-zonings for buyers on properties I have sold them or sometimes on properties I did not sell. My wholesaling has been slow since Covid.

This spring I bought a second Colorado wholesale 4-plex from myself on an estate deal for just $240K that had an appraised ARV of $850K and am rehabbing it and getting close to completion. I declined a six-figure wholesaling fee to instead take it down and rehab it, which is not my specialty. It will likely appraise at $900K now as the 4-plex immediately across the street just sold for $1M and was dated inside though larger but still 2 bedroom units. This property is nearly a total gut/floorplan changes but I have a HML and rehab budget this time and am under budget as doing much work myself with another fellow. I can use the amount that I'm under budget to pay the other's property taxes if needed, as I have access to the rest of the budget if not used on the rehab.

My self-employment in 2020 was low at only $16K absent depreciation add-back on the other property. It was only $35K pre add-back for 2021 and few liquid reserves so I'm told I need to do a DSCR loan. With the rehab and HML payoff I will be at $370K on a Take-Out Loan.

I would like to take more funds for a downpayment on the single-family rental I inhabit - on owner carry or then FHA/Conventional if not. I previously wholesaled the single family but have rented it for years sub-market but the owner wants it back to sell and its in the $400's now. Getting the take-out loan on this fourplex takes priority though, but I would like to do the single afterward if possible, even closing during 2021. Rents on this fourplex will be $6.5K per month and PITI at the 5 1/4 I was quoted with my mid-score leaves me at PITI of $3K.

So my LTV will only be 40-50% and my Debt Service Coverage Ratio will be a little over 2.

I have the IRS/state payments of $800 per month which don't appear on a credit report but do appear on bank statements and which I suspect would be loan fraud not to disclose, and the back property taxes and very high credit usage. A lender who quoted said its hard to get a DSCR loan without credit above 740 but that he had been able to find one. Perhaps he's trying to make it sound like he'e the only one who can get it done. But he doesn't know of the IRS/credit cards. I have no formal IRS lien but the installment agreement may be viewed the same. I don't contest the debt.

I would like to "buy this fourplex from myself" and not have to sell it and take the ST Cap Gains hit. I'll be approaching critical mass as a landlord again after a 15 year absence due to doctor stuff where I had to sell all properties and crush my financials but I'm still topside. I also better appreciate how rare these types of deals are. 

 What is my strongest course of action to obtain take-out financing? Thanks for listening.

I'm slower than the continental drift on getting back, but I did complete the move-in with the tenants and all is good to date. 

When I suggested the potential tenant meet me at the bank and I would return the cash for a lease termination agreement there were profuse apologies and then some crying. I was told its my decision on what to do.

I had earlier checked with my long-time attorney who said I can be liable if they have an executed lease but are denied occupancy. They could rent something much more expensive and I would be liable for the difference, but that I was welcome to offer the cash back in return for a termination agreement. 

I'll certainly make note not to sign a lease myself until the tenants are moving in, to have an AS-IS clause, to have a non-refundable portion of the deposits, and to make use of the "Happy Clause" or "The property clearly isn't ideal for you" approach. 

Just when you thought you'd seen it all....there's more ahead. 

Appeal to BP Nation- I have erred in accepting tenants and seek to cancel a lease before the tenants occupy. 

I went through my usual screening process which has treated me well for decades and it looks like I missed something on some tenants I accepted. The tenants were fine with the condition of the property and asked if there was going to be a professional cleaning and I said I"d never done that before and they agreed that no professional cleaning was necessary - the carpets had already been cleaned by a pro. 

On the date of move-in, tenants refused to take occupancy or move any items in, and said it had to be cleaned by a pro and wanted me to pay $350 to do so. They were absolutely freaked-out that they literally had "found a dead fly" on a countertop. I've already been threatened with legal action before ever taking occupancy. 

I can see this will be an extremely difficult tenancy and would like to return their monies in exchange for a lease termination agreement. I really think the one person has an undiagnosed medical/mental condition, despite their 800 credit score, etc.

In considering what their "damages" would be - they are living in the basement of the wife's mother, where they moved to take care of her after a surgery, shortly after their wedding - so their damages would seem minimal. They have a 5 year rental history as a couple prior to their wedding, before that. 

The lease agreement was made on July 28, though for some reason I signed my side of it on July 31 as I had in my mind that they could move in on July 31, despite signing it on July 28. 

They paid me in cash and are also besides themselves now - that they didn't get a receipt from me. I was given a deadline of yesterday to provide them with both a receipt and a statement that I will pay for the professional cleaning. I am told they have a relative who is an attorney, etc. I haven't mentioned that I want to cancel the lease yet but the best time to get rid of a problem seems to be before it moves in, so to speak. There is no shortage of interest in the Denver, CO market. 

The tenants make 3.1 times the rent (which is acceptable) and so are close on the rent/income ratio and not especially "long on cash". If I say I will return their monies of $3700 in full for a lease termination agreement - or they can take me to court - they would probably choose to have their money back now so they can pursue another property. 

How can I exit this situation, as I now know the character of the persons I"m dealing with? The escalation/controlling during phone conversations has been unbelievable. 

There will probably be another dead fly in the property -perhaps even a spider - before the lease would conclude and I just don't need to go through all this, especially in such a strong market. It seems I"ll be more their "employee" than their  landlord throughout the term of the lease. This would seem like the best time to assert myself. 

Help!

With this particular surveying company, they saw the error of their ways and provided the corrected survey with the correct lot numbers and easements in the proper places.

This is a different surveying company than in my other recent post. 

They are, however, refusing to bid on any other work I have offered them as I pointed out some issues. I suspect they have a very small "complaints in-box", so to speak. I certainly appreciate the inputs I received from the BP community, above! 

I hired a surveyor to do what is called a Zone Lot Amendment in Denver, CO. It allows two parcels to be separated and sold separately and is required in this situation. I work with a handful of different surveyors here and there is also a large spread in pricing between them. 

The surveyor completed the first version and it was submitted to the Zoning Department and came back with some required changes, as is common when working with Denver Zoning. I have to resubmit with the required changes and the surveyor has informed me that a colleague filed a complaint against him with the State Board and he is on probation until it is cleared up and he can't sign-off on surveying work until then. 

I have deadlines to meet and loan carrying costs, etc until the parcels are sold and can't sell either until this is completed and the new legal descriptions are finalized by the city. 

It can take months to get to the front of a surveyors schedule here as they are swamped, not to mention the additonal costs. Can another surveyor review this surveyors work and not have to repeat it and the costs entirely? Perhaps there are other suggestions. 

I"m somewhat lost on what to do in this scenario. Thank you. 

I hired a licensed Colorado surveying company to complete two Improvement Survey Plats two separate, adjacent fourplex's located in Evergreen CO. It should be mentioned that Improvement Survey Plats are often confused with Improvement Locations Certificates, which only display a structures location on a lot. The first costs thousands each, and the seconds costs hundreds each. The suveying company is located in Metro Denver but has contracts with people who do the survey work in the mountains/foothills outside Denver. 

I"m seeking to rezone the lots as they are pre-existing, prior to the first zoning codes, which later came in and only granted duplex zoning, so these are legal, non-conforming but can't be converted to separate up/down "condo" sales as lenders won't loan if a structure can't be rebuilt after a catastrophic loss unless its zoned correctly as their collateral is compromised and that is the case in the county where these are located. 

The surveyors first completed surveys had incorrect lot numbers on 6 lots and so I asked that they be corrected. They were corrected and now its seen that an easement is shown on the wrong lot and about 75 ft away from where it should be. Further, its now seen that 3 of the corrected lots were replatted as part of splitting a duplex and have different current legal descriptions than the original lot numbering and are still incorrect. 

The surveys have to be presented first at the required Neighbohood meeting on the Rezoning, then to the Planning & Zoning Departments, and finally to the County Commissioners, who have the final decision on whether to allow the rezoning from duplex to fourplex on the pre-existing fourplex's. 

I first paid 50% of the total cost. I didn't want to pay more before the surveys were complete and accurate but paid another 25%, at their insistence, to have the first revisions done. Now the surveying company says they won't consider the second revision until its 100% paid, and if I don't pay the final 25%  this week that they will send me to "Collections" and "have the survey cancelled". I"m told that if it goes to collections that they can have no more involvement with it, and then I'll have to deal with the Collection Agency solely. It sounds like they had already recorded the first, incorrect version and will record a retraction of sorts if the demand is not met. 

If I make the final 25% payment I'll have no leverage to get the job completed and confiden I'll soon find what their fee is to make another revision, and it will go to the back of their workload again. 

Submitting inaccurate surveys to the different governmental agencies isn't wise, and I have a sense of being held hostage on the matter. The actual surveyor who did the work asked those above him if he should prepare the revisions and I provide the position those above him are taking against me. 

What can I do in this seemingly distorted situation? Having the lot numbers and easement displayed incorrectly on the final work product is of little value to me. 

I appreciate your replies made on this matter. It's certainly interesting to know that the thickness of glass is apparently the most important part of a quiter window and then air gaps are adjusted. 

I did contact Window World and they quote 10-15 weeks to recieve the windows. I called on Wednesday and they made me an appointment to for the following Monday to speak with a salesman by phone. I recently purchased the property and will have this first unit ready to rent in about 2 weeks. 

If I can make a low-dollar window quieter I think I'm better off as the window is 8 ft wide by 5 ft tall and only two feet off the ground and prone to breakage. I can get another off the shelf for$278 at H/D. I've seen videos where people put an additional piece of plexiglass at the rear of the window opening, attach a plastic edge to the plexiglass and attach with "pivot screws" and it creates an additional air-space and is removable for cleaning. 

Still working on ideas on it. If someone were to make windows to order in a more time-sensitive manner I think they could do a great business. Not sure I want to be tied to slow lead times for rental units along a busy street that are prone to breakage by how low they sit, etc. Thank you for the suggestions. 

I should mention the current low-dollar large front window has a hole about the size of a dime in the outer pane and the inner pane is intact. So not an entirely fair test, but no one will want to live with the sound of each car passing by.