All Forum Posts by: Tanner Lewis

Hey Bryan, 

A lot really plays into the valuation and listing prices for properties: bed/bath count plays into it for sure, but also appraised condition, neighborhood location, neighborhood class, expected rental income, etc. 

Instead of comparing beds/bath counts to listing price, I would instead figure out a good metric to measure progress with. Some people use the rent/price ratio, cash on cash return, annualized ROI, etc. I would look at a variety of ratios and make sure they meet your buy box to determine if it is a good deal.

*another point to mention is that the beds and baths could be appraised as below grade, making the appraised value equal to the 3 bed/2 bath

For lending, they are almost always based on comps. In the rare case of a multifamily (5+ units), the income may be taken into account when using cap rate and NOI to calculate the value with the income approach, but for the most part, 1-4 unit STRs are valuated with the sales comp approach.

Hey David, 

Either option is very practical depending on your goals. A turnkey acquisition is a little more predictable but comes with the cost of leaving a little more equity in the deal. An AirBnBRRRR would allow you to ideally leave less equity in the deal, but is also very difficult for a first-time investor, especially with minimal rehab experience. 

As a hard money/DSCR lender specializing in short-term rentals, I suggest doing a turnkey to start and just focus on systematizing your processes so you can take on a deal that has a little more difficulty. If you decide to do a distressed property, only take on the project if it is a light rehab (most investors get in way over their heads with extensive rehabs for their first one). If you are planning to put in more than 15k to the rehab, I would look at how the numbers work with a hard money bridge loan, as you can normally get better terms on the refi if you are refinancing out of other debt.

Hi Aaron, 

I suggest going with a lender that offers both products (you can find many investor-friendly lenders in BP's Find a Lender Tab). 

With one of these lenders, you would typically do a hard money bridge loan covering the majority of the purchase cost and all of the rehab. Then after the rehab is completed, you would just have to refinance the loan into a DSCR loan. The main benefit of using the same lender for both, is the refinance process is a lot smoother than if you use different lenders, mainly because a lot of the loan requirements can be satisfied in-house.

Hi Jeff, the main complication here seems to be your work history and with that I see two main options that you can do.

1) Wait another year and do a low money down/FHA owner-occupied house hack. I would do this with a 2-4 unit and use the rental income to cover your living expenses.

-or if you want to start in the meantime-

2) I would go with hard money/DSCR lending. I am not sure about your experience with rehabbing, but one option is to BRRRR with hard money and refinance into a DSCR loan, but if you are just looking for turnkey rentals, I would begin with a standard DSCR loan which can usually go up to 80% LTV based on the lender.

You laid out a pretty good framework of these options already, but the main item is your timeline. If you have a property that fits your buy box now, go DSCR, if not, hold out and wait for an owner-occupied home. Getting a DSCR loan before an FHA loan could make the FHA more difficult since it will increase your debt-to-income ratio.

Another thing I suggest is to start working with a lender that works with investors and oftentimes, your lack of work history can be supplemented with other activities. For example, I am looking for an FHA househack right now, but have 6 months of work history, but my 1.5 years as a student will satisfy the rest of the two-year requirement. Ask your lender if the time you spent caring for your father can help you meet those requirements (I doubt it will but its worth asking).

Hi Nolan, if I were you I would first ask the seller if they would finance the repairs, but if they decline, I would explore hard money options as well to cover the rehab. When the property is fully rehabbed, you can refinance with a DSCR loan and pay off the seller-financed lien and the hard money lien, but this will most likely put you at a higher interest rate than if the entire deal is seller-financed. I would try to explore that route first.

Hey Tanvir, I'm a hard money/DSCR lender and I would love to connect! I'll shoot you a DM!

Hey Owen, if you can bring a minimum of 20-25% to the table I would love to help you! My company specializes in AirBnb acquisitions with 30-year DSCR loans and can underwrite you with either the AirDNA projections or the trailing twelve months of rental history (which it seems like you have).

I suggest both. An umbrella policy is going to be your first line of defense especially from tenants, but the LLC (especially one nested within a Wyoming, Nevada, or Deleware entity) will provide inside-out and outside-in protection and fortify your asset protection strategy

 Another consideration: excess square footage may present forced value add opportunities for adding an additional bed/bath