question for lenders and brokers:

[Nathan P Tanner]

Hey everyone, I’m in the process of acquiring several single-family homes that will be leased long-term to a sober living company. My plan is to buy properties needing medium to heavy rehabs, remodel them, rent, refi, and hold long-term. So far I have a location  and buy box from the company that will be renting my properties long term, they will sign 5-7 year lease. I finally found a property that will cashflow, im in the middle of getting multiple quotes for the rehab work that needs to be done.  

I had a question for lenders and brokers:
Do I need to prioritize using a local lender?

If a lender isn’t local, what are the best ways to vet them to make sure they're reliable and a good fit for long-term partnership? I'm looking to build a solid relationship with someone who understands the BRRRR-style model and is comfortable working with this type of tenant setup (sober living, structured housing).

Appreciate any insights or recommendations, especially from those who’ve built strong lender relationships over multiple deals. I just want to make sure I’m setting things up right and avoiding major issues down the road.

[Wesley Pittman]

Hey Nathan,

One thing that bit me in the *** on a deal was the first time I tried to BRRR a 5+ plus unit building. Commercial lenders typically have seasoning periods—they don't love seeing the owner take out more debt than the acquisition amount within a short time after purchase.

If you're not confident that you have a conforming/DSCR lender who'll allow a cash-out refi after you lease it, make sure you find one before you pull the trigger on the take down. In our case, with the 6 unit apartment building we ended up losing about $100,000 because the market softened substantially (this was 2022) and the commercial lenders required a 1.3 DSCR while rates were rising so the amount of equity we had to leave in the deal to cash out our bridge financing was just way too high to make sense... so we just sold it and licked our wounds.

Have you connected with Vontive? They've been taking a lot of market share lately and seem to have pretty flexible terms. They might be fine with a corporatew tenant. In the next few weeks here I'll be placing a tenant who sublets the unit for construction housing (think man camps), and I'll be doing a DSCR take-out with them and him as the tenant.

They may not even ask much about the lease agreement if it looks like a standard lease to an LLC.