his target was new to newer investors who frankly just trusted him.the issue he did not make full disclosures as to if he was a principal or not.. the ground partner took in untold millions in rehab funds and pocketed it.. leaving these folks with UN rehabbed homes that they paid to have rehabbed. in some instances he did new construction like this one.. and again the buyers being new simply did not know you don't pay 100% up front for a home that is not built.. so what they got was a bare lot.. and no house and the money gone.this will not end well for those behind this.. there is only so much blame to through around..  

If Borrower does not pay the full amount of the principal and interest on the date it is due, Borrower will be in default.

There are 4 other key aspects to consider when analyzing deals and they are - tax savings, principal paydown/equity building, appreciation, and inflation hedging. 

When they exercise the option, I get the amount left over after paying off the $300,000 minus principal paydown.

In NY for example, you agree in principal, but do inspections before the attorneys write the contract when it is a full go.

For example, on my 1.7 mil loan, my payments went from 9k a month to 15k a month, principal and interest payments. 

as Update to this post from 6 years ago, there are heloc's on owner occupied 2-4 unit properties up to 89.90% CLTV or combined loan to values (meaning multiple loans but all together not exceeding 90% of the value).Terms typically areinterest only first 10 years and drawable from the lineyears 11-30 its Principal and interest payment Prime index/rate + margin (this portion is fixed but prime is not)underwriting is done assume prime + margin + 2% stress test for underwriting meaning if your prime + margin was 10% then your underwriting rate used to determine your maximum line you can qualify for would be 12% rate as an example based on principal and interest payment over 30 years or 360 monthsIncome is the main determinant of your qualification and fico min 680+ is just the min score to get through the "front door,"Maximum DTI or debt to income allowed is 45% DTIMaximum lines on this product go from 500-750k so you can get a decent line size that can actually buy other BRRR's or fix flips and deals.

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

Being as you’re not a licensed agent and you’re dealing principal to principal, they’re not so many legal hurdles to overcome.

And having standardized coverage can help maintain property values.There are definitely some drawbacks to consider.