All Forum Posts by: Tanner Lewis

Quote from @Bj Meadows:

Found this site today on a podcast and thought I would give it a try! Been a Special Education teacher for 25 years- trying to retire and have studied real estate investing... realize I cannot do my own flips after buying my forever home after the hurricane... but that is a different story! I am now looking at multiple properties that I am interested in for LTR or STR opportunities. One is a JUMBO that needs a TON of work- and trying to finalize that deal now- I hope. But in the meantime, I thought- why stop at one property? Why not purchase several because each property can pay for itself and I am seeing all of these lenders flooding my Facebook now that I have googled some loan options- and so many offer 100% financing... what am I missing here? If there are 100% loans... why isn't everyone doing this? Are they ALL scams? Can you legitimately purchase multiple properties with this kind of funding during a short period of time? What is the drawback? Also looking to find private lenders who deals in my area- maybe to get a better deal on this JUMBO I am working on. Looking at around 500K for purchase and rehab but the income potential is amazing! Any leads, advice, etc.- highly appreciated!

Some hard money lenders will "offer" 100% financing, but a lot of them are doing a bait and hook strategy and will still be limited to LTV regardless. For hard money lending there are two percentages that limit loan amount: LTC and LTV. LTC is a loan to cost, or your loan to your purchase price + reno. LTV is a loan to value or loan to the after-repair value. In most of these cases, you will be drawn in by 100% financing and be limited to an LTV ratio anyway; you're just stuck with a higher interest rate. Some of these lenders will not acknowledge the LTV limit until you already have the appraisal, and then they cut leverage. Be cautious with these lenders. 

In my opinion, very high leverage is not worth it to investors with high liquidity. These are mainly meant for first-time investors with low reserves, and you end up making a much lower profit margin due to the extremely high interest payments. 

At least with DSCR lending, cash-out leverage will be at 75% LTV max, while leverage on acquisitions will be up to 80% LTV. If you want to maximize leverage and have the easiest time with financing, I suggest using leverage for the purchase and just qualifying with AirDNA. It can sometimes get tricky doing cash-out refinances for STRs in less than a year.

@River Sava and @Elle LoFrisco have a bunch of great realtor connections in markets across the country. Reach out to them if you are looking for a referral to an investor friendly agent. 

It depends on the lender. Most lenders specialize in one or two products. For example, jumbo loans are going to be lumped in with bank statement loans and other non-QM loan products meant for owner-occupied properties. If you are looking for an investment property, you would be looking for a DSCR or hard money loan, so I would look for those lenders with BiggerPocket's Find a lender tool.

Brokers are another option, but unless they specialize in one or two products, they are throwing darts at a board and hoping it sticks. Red flags to look for are brokers offering both QM and nonQM products, such as VA and FHA loans concurrent with hard money and DSCR.

At the end of the day, it really boils down to if you trust the account executive/loan officer not to misrepresent the terms for the deal. I see a lot of clients come to me with term sheets from other lenders that arbitrarily increase the ARV or credit score, just to bait and hook the borrower into doing business with them, so just be on the lookout for this.

I've used BatchSkipTracing to look at liens. I think TICOR also may provide that information. 

Honestly, the short answer is that you need cash to make cash. I suggest partnering with an equity investor on your next deal and making the numbers work that way. Most investor loans require a minimum of 20% down for rentals and 15-20% down for flips, especially if you are a first-time investor. You will also need liquid asset reserves to get financing on a deal. It depends on the product, most it can range from 3-6 months of PITIA. 

I would only explore second-lien positions loans if your current interest rate is in the 3's. If it is a recent mortgage, then it may make more sense to do a cash-out refinance. I would also only use that money for the down payment on another deal, not buying it all in cash. Most of the time, deals pencil better with a regular DSCR loan for an acquisition than with a high-interest rate ARM on your primary.

I'm biased, but I don't think conventional is the best product if you are doing a rehab. You mention using hard money for the rehab, which, in combination with a conventional loan, would require you to be in high-interest rates for a year until you can cash out refinance. With some DSCR loans, you can cash out refinance in as little as three months, and the rest you need 6 months. With conventional, this would mean you would be paying 6-9 months of high-interest rate debt before you can pull cash out.

If you decide not to do a DSCR loan, the second home loan is a popular option, but there are lots of drawbacks for investors as it is really a product made for regular home buyers. With second home loans, the mortgage must be for one unit (I do a lot of 2-4 unit STRs), the property must not be rented for more than 180 days out of the year (limits revenue), must function reasonably as a second home (usually limits out of state investing), rental income will not qualify as stable monthly income (projected AirDNA does not play into your DTI). There are a couple others, but you can check the Freddie guidelines yourself:

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

For AirBnBRRRRs, I suggest structuring with a hard money loan to purchase and rehab the property and then doing a DSCR refinance using AirDNA projections. This gives you the most flexibility with investment properties. Also if the prepayment and rates are a deal killer, you can always structure the deal with no prepayment or buy down the rate to the 6's.

If you are looking for a lender, I suggest using BiggerPocket's "find a lender" tool. What is your investing strategy? 

Some DSCR lenders will lend to first-time homebuyers, but many require that you own your primary residence. I suggest looking on BiggerPockets' "Find a Lender" tool to find DSCR lenders that are able to lend to first time home buyers.

If you are looking at college rentals, I suggest not renting-by-the-room. This strategy looks very lucrative on paper, but it is incredibly difficult to finance since it makes the property functionally obsolete. I suggest looking at small multifamily (2-4 units) and renting out with one lease per unit.