All Forum Posts by: Tanner Lewis

I've done a few STR deals in Galveston; with Texas taxes, it is tough to cash flow without doing an STR. I have seen a few solid, high cash flow LTRs in Houston's sister cities.

It would probably be easiest to amend the operating agreement to remove those members. You can also do a deed of transfer at closing and switch it into another LLC, may be some title fees but since there is no sale, it is not a taxable event.

If you have the ability to target a specific purchase price, I suggest staying in the $250k-$1m range. From a lending standpoint, most loans <$150k loan amount has the highest risk and, therefore, higher rates. Typically, anything in the middle range has a reduced risk and more favorable terms. 

With conventional financing, yes. With DSCR, no. With all of my deals, I suggest that borrowers buy within an LLC/entity since it gives them the most protection. It is just that way with conventional financing since those loan products are made for owner-occupied properties, while DSCR loans are made for investors.

You cannot do so as they are strictly investor loans. If you are looking to do this owner-occupied, conventional may work, but if you have issues qualifying, you can run the numbers as a non-owner-occupied property and pursue a DSCR loan.

If you want financing, I would try to save up a bit more. I would try to have about $40k saved up for a down payment to make the deal financial for most lenders. There are not many that are able to do loan amounts <100k, much less <75k

Some hard money lenders will lend to you even if you are a first-time home buyer. They will also be your answer to your rehab financing needs. Since this deal is being bought for a low cost, many hard money lenders will pass on it unless it is an extensive rehab with a significant value add. 

Your lender will direct you in the best direction regarding insurance, title, and pretty much most closing tasks. When I do hard money loans, I run title, get an insurance quote for the borrower, and do the desktop appraisal on the deal. You will need builder's insurance for the rehab and landlord insurance to hold it as a rental. Again, your lender will tell you what requirements they need. 

CLOSE WITH AN LLC or another entity. It protects you the most as an investor. I would talk with a lawyer about how to structure it, but most of my borrowers use an LLC in the state of the investment property nested within a Wyoming LLC holding company. DO YOUR DUE DILIGENCE ON THIS. Hard money and DSCR lenders will also be ok with an LLC taking out the loan and holding title, conventional lending will not.

The main issue with multifamily STR deals is financing. I'm not sure what unit count you are looking at, but most 5+ unit buildings need to be LTRs, but anything 2-4 unit multifamily can easily be done with A DSCR loan for short-term rentals.

@Jon Martin I think the guidelines tightened from people using second home loans for STRs. Fannie/Freddie are, in theory, supposed to be used for owner-occupied properties and not investment properties, so they are trying to deter this type of behavior. I think the idea is that a property should not be booked for more than half a year (because you cannot use it when it is booked). They don't expect you to live there for half a year, but it is more of having the ability to.