All Forum Posts by: Tanner Lewis

Hey Moses - I am in Austin myself! As a beginner, I assume you will be looking for a decent amount of cash flow on your first deal, so I suggest Raleigh. In Austin, it is more of an appreciation market, and the high taxes make it hard to cash flow here. Once you get a few deals that cash flow, it makes more sense to expand into appreciation-focused markets. 

Since you are an STR investor, DSCR may be a better fit for you. You can use AirDNA to qualify your deal, and the lender will not be looking at your W2 income or number of conventional loans.

Houston (and all of Texas) is difficult if your strategy is to prioritize cash flow due to the high taxes. I am a big fan of the Cincy market, and I have seen a bit of movement there recently form investors. 

Set aside enough for a 20% down with sufficient reserves. Normally, I suggest aiming for $45k+ if you are looking at $140k+ deals. Note that anything under $100k loan amount will be hard to find financing. 

I suggest working with a STR-friendly real estate agent! They are the best resource for understanding local STR laws and ordinances. I suggest working with https://www.getchalet.com/ 

This is true! You can't take out a conventional second home loan with an LLC. If you transfer post-close, you may violate the "due on sale clause in the mortgage docs," allowing the lender to call your loan due. You also will not be anonymous when people look you up on property records since they will see that you, as an individual, purchased the property (Use Wyoming LLCs!).

With DSCR loans, Florida requires that you borrow within an entity, and as such, your spouse has no ownership or legal recourse (even though it is considered a spousal state). I would also set up your will/trust structure with a lawyer so YOU can decide who gets your assets and it is not up to the government.

DSCR is the way to go: I just closed on one in the Outer Banks with a 7.375% rate and used AirDNA to qualify. Second home loans are great, but they are best for high-income W2 employees looking for a vacation home, not really for investors looking to scale.

Best example of this is 2-4 unit STRs. They are absolute cash cows, but you can't qualify with a second home loan since they are only for SFRs (Freddie guidelines in the link below)

https://guide.freddiemac.com/app/guide/section/4201.15

Lipstick rehabs are normally just redoing kitchen + bathrooms + light work around the house. The exact definition varies from person to person, but I mainly consider them <$40k reno and hitting those items. Anything down to the studs/foundation/roof/etc is a more in-depth reno. I would chat with a conventional lender about what max leverage they can provide on a refinance, I know with DSCR you will be right around max leverage for a cash out (75% LTV) and it would likely be break even. That is with the $240k ARV (which I think is likely high) and the $30k reno (which may be low), but of course, that is without looking at any of the numbers/comps.

The best way to do it is to permit and find out how to meet head clearance or not do the project. It seems like a small headache now, but it is a much bigger headache once you go to sell/refi