All Forum Posts by: Tyler J.

When I say "institutional", I mean a bank, fund, or professional loan company. Non-institutional, I would consider, an individual lending out of their IRA or something similar. Technically, DSCR and Flip loans are "Commercial" as they are made to an entity (LLC, S-Corp, or the like) while Consumer Residential Mortgages include Fannie/Freddie/FHA, VA, USDA, most non-QM, etc). Are you buying this property in your personal name? as an investment? a residence for you? in the name of an entity? That would help me answer, but my above answer will likely be the same.

Institutional lenders typically don't allow this. They will want to "source" the down payment, meaning that they are going to want to know where it comes from. They might ask for two or three months of your bank statements to see if it has "seasoned" in your accounts for a while...meaning was it in the beginning balance of the oldest statement. If it was deposited, where did it come from? They'll want a paper trail such as a settlement statement from a property you just sold. Some might accept a gift from a family member, but they'll have to source that too. Usually, they will not allow borrowed funds or a seller concession to be the downstroke for your down payment. Default rates are exponentially higher for those who don't have their own cash in the deal. We will want to see some sort of skin in the game. I hope that helps. 

My wife and I get creative with our financing. We maximize sellers assist with commercial loans because there’s no limit. For example if the seller is asking 120k we’ll offer them 150k with 16% sellers assist. Thus leaving the seller with 123k at closing and us 27k towards our closing costs. It’s a way to fool the bank into financing our downpayment. We also wave inspections to sweeten the deal. Obviously don’t tell your lender either because all they need is a copy of the sales agreement and don’t need to k on anything else besides the price and sellers assist amount.

not that complicated although some folks want to drill into the nats behind.

but for rentals here is a really good napkin math that takes no more than a few minutes.

RENT   what you are pretty sure it will rent for

Deduct 50 to 60% from the gross rent ( if your using PM) if not 40 to 50% )

these numbers have some cushion in them.

whats left over is how much you have to pay your mortgage..

if it pays for it self or makes a little money then dive in.  If not pass .. or if it has some special features even negative cash flow can be great deals.