New lending standards, what’s your prediction?
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
New lending standards, what’s your prediction?
Most Popular Reply
Cameron TopePro Member
Property Manager · Katy, TX · Member since 2015 · 1k+ posts · 1k+ votesI don't think we'll have a housing market issue.
The jobs that are lost are mostly small businesses and low-paying jobs, which the trillions of stimulus money will assist. The high paying jobs are either furloughed (for a few weeks) or working from home. These people are still making mortgage payments and buying properties.
I don't think you're going to see the 10% appreciation growth like you have in the past but a more sustainable 2-3%. Rentals are going to be more popular because tenants are using savings (which they had saved for a downpayment on a house) for living expenses, making them tenants for longer.
I think the only people that are going to get hurt are the clowns that need 10% appreciation and rent growth to make their syndication deals look enticing to new investors that don't know any better.
The investors that buy (and continue to buy) solid cashflowing rentals will be fine.
62 Replies
- Member since 2019 · 1k+ posts · 1k+ votes6y
@Nick Rutkowski
Well, banks earn good income from lending so... Personally I think as the crop of candidates slowly turns into crap they’ll be happier when they see folks who are better than crap. And then never underestimate human greed and human stupidity, mainly in the form of short term gain causing long term pain. Pretty much guessing if you’re fairly liquid you won’t have too much additional difficulty. If you’re not fairly liquid you’re gonna get penetrated but shortly after that even you will have access to cheap capital again as federal governments addiction to deficit spending increases. Politicians have only two jobs: get elected; get re-elected. They buy votes with deficits (see human stupidity comment above). High interest rates are even less likely following this crisis in my opinion as all 3 levels of government in many areas would be squeezed into failure if rates even go back to a historical “normal”. Here in Canada, it’s entirely possible I could go the next 40 years without seeing 7% prime rate and maybe even 5%. The Feds, Ontario, Quebec and British Columbia would all default in short order at 7%. That or I would see a 65% tax bracket...
- Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes6y
@Calvin T.
It depends on how you look at the current situation. I think those that own a small unflagged hotel right now are about to see their end soon. Which to me could be my way of moving up. People aren’t booking hotels when they are out of work and are forced to stay at home. Hotel owners still have to pay their mortgage even though they are considered essential and are open. It could be an opportunity.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Cory H.:
I usually do business with a local small bank. Sounds like they aren't stopping loans, but are pausing them for a few weeks due to manpower. It's all hands on deck apparently to dish out SBA loans!
there you go my banker called me today in fact and they worked all last week even 8 hours on Easter Sunday processing 3,000 SBA loans for their top teir borrowers that i am fortunate enough to be one.. My banker hand walked my PPP through.. and i signed docs today.. I feel for anyone who has to try to do this through one of the big banks .. and of course the money ran out..
My bank though is still processing my construction loans.. no change there.. little slower.. But my banker did tell me some of their bigger MF projects have been put on hold.. We / him and I think there could be a glut of labor which will bring sub contractor prices back down which would be a nice event for us that build new construction. My wife who is selling our 90 home project in Canby Oregon we have over 30 on our waiting list and she gets calls virtually everyday.. and thats just off of one sign. so FINGERS crossed TOES crossed EYES crossed we get to the other side.. rates are suppose to be very low next few years.. so should be OK and at our price point buyers have the cash to put down
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matthew Peterson:
@Nick Rutkowski
I closed on two rental properties in the $300K each range this month and have one more to close on. My lender (at Chase) said he had 11 deals fall through in the past 3 days. We spoke yesterday. I’ve personally backed out of 1 deal and am closing on 1 more for now. I’m fairly liquid and am keeping a lot of dry powder ready for whatever happens in the next 12 months.
He stated that Chase standards as of Thursday afternoon were 30% down and the buyer must have liquid capital of 18 months PITI in the bank. So even on a 200K house, that's 60K down and roughly $1,500 x 18 needed in your checking account on top of the down payment. Majority of US primary residence buyers don't have $100,000 cash sitting around. For those in rental markets dependent on the income, I feel for them. The value of liquidity has never been so evident.
My lender sounded devastated because of all of his deals that fell through. He reminded me that most folks buying a primary are putting 3-10% down, which is why there will be a deluge of deals falling through with the new standards. He mentioned BofA isn’t even originating new loans. Not sure if that’s valid but that was his statement.
Not sure about that for a primary owner occ purchase ( 30% down) unless its a JUMBO. for investment property certainly those are the terms and investors should have that kind of horsepower..
- Member since 2019 · 1k+ posts · 1k+ votes6y
@Jay Hinrichs
Agree completely on the glut of labour. But one asterisk that I see is a glut of mainly UNskilled labour. Does the world class carpenter/ welder/ tile guy/ architect etc really sink like a stone when the slow transition to an operating economy comes? Personally, I don’t think so. I think it’ll be similar to ~2013 here in Canada when oil collapsed, we saw an entire generation of folks qualified to pump gas actually have to go back to pumping gas instead of earning $100k+ annually because they had a pulse.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Nick Rutkowski:
@Calvin T.
Mom and Pop motel/hotel, small under 35 rooms. I own short term rentals and looking to level up. Something within an hour from where I live if I was to operate on my own. With partners, I’ll go further out but I don’t know how much use Id be due to my lack of experience.
it something like this OVer 50% of the hotels under 100 rooms or under 50 rooms are owned by Patels so family owned and operated I suspect many have no debt or very little.. others could be leveraged and in trouble..
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Account Closed:
@Jay Hinrichs
Agree completely on the glut of labour. But one asterisk that I see is a glut of mainly UNskilled labour. Does the world class carpenter/ welder/ tile guy/ architect etc really sink like a stone when the slow transition to an operating economy comes? Personally, I don’t think so. I think it’ll be similar to ~2013 here in Canada when oil collapsed, we saw an entire generation of folks qualified to pump gas actually have to go back to pumping gas instead of earning $100k+ annually because they had a pulse.
My Bankers point was many skilled labor folks left the industry in 2008 to 2011 when building STOPPED dead in its tracks in the US and got other jobs.. now those jobs stop and they fall back to what they knew or know.. ????
- Member since 2019 · 1k+ posts · 1k+ votes6y
@Jay Hinrichs
For sure. Oil industry here saw some periods of “good” unemployment numbers... as those looking for work gave up and retrained for something more reliable.
- Developer · Atlanta Ga · Member since 2011 · 47 posts · 37 votes6y
@Jay Hinrichs I thought the same, but he stated it was for primary and reiterated most of his clients were doing 3-5% down and it completely blew their loans apart with the new regs. He said it came down from Chase execs Thursday night.
I’d love to have your bank contact by the way! I’ve done a couple million in loans with chase over the past couple of years and they haven’t mentioned any programs at all to me like yours is helping you with. I do my personal banking with them, my business banking and all loans, I think I’ve become a creature of habit!
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matthew Peterson:
@Jay Hinrichs I thought the same, but he stated it was for primary and reiterated most of his clients were doing 3-5% down and it completely blew their loans apart with the new regs. He said it came down from Chase execs Thursday night.
I’d love to have your bank contact by the way! I’ve done a couple million in loans with chase over the past couple of years and they haven’t mentioned any programs at all to me like yours is helping you with. I do my personal banking with them, my business banking and all loans, I think I’ve become a creature of habit!
Not to go into the tulles with this but we first met in 92 when he was fresh out of collage in his first banking job.. And gave me my first 100k loan to go buy Timber LOL.. And well I have stayed with him all these years through changing of banks him moving up the ranks.
He was slated to take over the last bank he was at and become el president but Rick and Fred ( president and head Credit officer and two largest stock holders) got an offer from a large regional and they sold out.. So Dan ended up being the Senior VP in charge of all lending in Oregon .. and its like a said a 10 b regional bank big enough to do deals small enough to have some personal interface.. And we went through the GFC together without him I would have been toast.. And at the time I was the largest borrower at the bank so it was a little bit of too big to fail they could not let me go down LOL.. Anyway.. he got my PPP and I Feel after paying millions of dollars in income taxs over the years why not.. And it does help our closings are way down..
- Developer · Atlanta Ga · Member since 2011 · 47 posts · 37 votes6y
@Jay Hinrichs I spoke too soon. He was throwing so much out at me yesterday. I just texted him and he responded. New rules for chase are:
Primary - 20% down, 6 months worth of liquid PITI in your bank
Investment - 30% down, 18 months worth PITI in bank
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matthew Peterson:
@Jay Hinrichs I spoke too soon. He was throwing so much out at me yesterday. I just texted him and he responded. New rules for chase are:
Primary - 20% down, 6 months worth of liquid PITI in your bank
Investment - 30% down, 18 months worth PITI in bank
Conventional has been at 10% down for a while now and reserves so sounds like they doubled the down.. FHA is still there I think last I checked. My new project 90% of my new homes will be able to use FHA or VA .. as fast as it changed one way it can go another.
when I first got into HML in the early 80s this is what we did NO bank would loan more than 80% so it was common for buyer to have 10% down and we did a HML 2nd for 10% and even in the bay area were I was at home prices were 75 to 150k so Jack ( who I worked for until I ended up with the company years later) he did thousands of these little seconds.. 5 points 15% amortized over 3 to 5 years.. it was solid paper in the SF bay area.
- Developer · Atlanta Ga · Member since 2011 · 47 posts · 37 votes6y
@Jay Hinrichs Interesting you started with timber. My family was in the timber and turpentine business down in north Florida since the early 1900’s.
My parents still have quite a bit of timber in Jasper Florida area but it’s just too slow of an investment for my taste. But, my entire life they would always say, “you need to get out of that stock market and buy pine !” They have big landscape companies in GA, SC and TN come down and rake the straw between the tree lines, bail it up and haul it back up for resale to Home Depot, Lowes, and whoever else wants it. My folks love timber..still, and they’re in their 80’s. I think they would rather have timber than cash in the bank.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matthew Peterson:
@Jay Hinrichs Interesting you started with timber. My family was in the timber and turpentine business down in north Florida since the early 1900’s.
My parents still have quite a bit of timber in Jasper Florida area but it’s just too slow of an investment for my taste. But, my entire life they would always say, “you need to get out of that stock market and buy pine !” They have big landscape companies in GA, SC and TN come down and rake the straw between the tree lines, bail it up and haul it back up for resale to Home Depot, Lowes, and whoever else wants it. My folks love timber..still, and they’re in their 80’s. I think they would rather have timber than cash in the bank.
the difference in what we did than most of the south was that a well stocked doug fir tract would have 1 mil net timber value on a 40 acre tract.. I logged one track were I got 400k off of 10 acres.. 3 slick 40s and a top.. if U saw the show AX man that was were we worked I hired Phil Peele a few times to log for me. we never owned any equipment just bought the timber rights and or the land and timber. your folks are quite typical of timber families love it.. NO DEBT cut a few trees etc etc.. OK I get my one hour a day to go walking my dog off I go. !!!
- Developer · Atlanta Ga · Member since 2011 · 47 posts · 37 votes6y
@Jay Hinrichs Those are some good returns for sure!
Yeah my folks thin theirs out every few years if they need some funds. Everything has risk I guess, they got bark beetles once, which was a nightmare. The department of Ag showed up, Weyerhaeuser, International Paper, Temple Inland, literally everyone, wanting to know how bad the beetle issue was on my parents land, because they all had a couple hundred thousand acres surrounding my folks acreage.
Sorry to sidetrack the thread by the way!
- Rental Property Investor · Tacoma, WA · Member since 2018 · 244 posts · 140 votes6y
I think the residential housing market is going to get crushed here in the near future. Especially in expensive markets where I live on the west coast. 20% down, 700+ credit score, and 6 months of PITI will be a game changer. Especially for people buying at higher price points. It is really easy to get into a $500k home here in Washington. $100k down, plus $18k in the bank as reserves will be a tough pill to swallow for most. I think the buying will stall and force owners to hold or severely lower their prices to sell. The bank I generally work with stopped jumbo loans, and FHA is gone. I hope I am wrong but I think values will fall significantly which will ultimately put banks in a bigger bind because every one of their clients that had a decent amount of equity as a safety net for the bank will be lost.
- Member since 2020 · 67 posts · 110 votes6y
Vegas going to get crushed. Casinos won't rehire because occupancy won't be close to what it was. State now talking about putting in an income tax to cover the shortfall of revenue from tourism. The small businesses expecting PPP money will not get any and close. Commercial vacancy will skyrocket. Nightlife, clubs, shows spas won't reopen either. Casinos will be forced to distance. RE will collapse until there is a vaccine.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Guy Bouchard:
Vegas going to get crushed. Casinos won't rehire because occupancy won't be close to what it was. State now talking about putting in an income tax to cover the shortfall of revenue from tourism. The small businesses expecting PPP money will not get any and close. Commercial vacancy will skyrocket. Nightlife, clubs, shows spas won't reopen either. Casinos will be forced to distance. RE will collapse until there is a vaccine.
Guy , Many of us moved her to take advantage of the tax situation.. if they install an income tax if its at all high then I fear a bunch of us will go ahead and move yet again.. I think there is a very good possibility that MF bears the brunt if what you say comes to pass..
One thing that I think we kind of gloss over is so many bought here in the trough and got smokin deals and fantastic interest rates so the actual home owner might be in a better position than 07 08 were prices were very high here and funny money was used to buy the assets and you had tons of strategic defaults.. I have no doubt there will be those that will have issues that's a given.. but to what extent.. I know your on the front lines of this so I defer to your expertise.. My son in law has a credit card processing company here in Vegas and of course a ton of his clients are restaurants strip clubs boutiques etc.. So he is very concerned of course.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matthew Peterson:
@Jay Hinrichs Those are some good returns for sure!
Yeah my folks thin theirs out every few years if they need some funds. Everything has risk I guess, they got bark beetles once, which was a nightmare. The department of Ag showed up, Weyerhaeuser, International Paper, Temple Inland, literally everyone, wanting to know how bad the beetle issue was on my parents land, because they all had a couple hundred thousand acres surrounding my folks acreage.
Sorry to sidetrack the thread by the way!
Northwest on the western side of the cascades is mostly doug fir so no Beatle kill.. but east side is really bad and up into British Columbia is right out of the Bible. its a big deal.. your parents were our clients that's who we bought from..
- 6yBryan MitchellPro MemberRental Property Investor · Columbus, GA · Member since 2016 · 634 posts · 337 votes
@Cameron Tope, yes, everyone has kept clamoring about how your preferred returns will be 8+% with forced appreciation following a light rehab.
When you make stuff up it makes people doubt the rest of your statements...
Do you really think 2/3rds of Nevada’s state senators and representatives would support a state income tax on the same ballot that they as asking for reelection? Since they need 2/3rds to change the constitution.
Why do people even say stuff like nothing will happen until theirs a vaccine, you do know that could be 18 months right? So no one goes to work for 18 months? Why don’t you just kill them now?
I don’t know what part of Vegas you live in guy but I don’t know one person that is staying home because they are afraid. They’ve already given up on “social distancing” (which, by the way it not what it is, it’s physical distancing). Go to a grocery store for 10 minutes and tell me how many times someone is within 6 feet of you. Heck, what’s our gloves and mask use percent at, 35% maybe
Ask 1000 Vegas residents if they would gamble 2 feet from another person tomorrow if they could. We need to get open while California stays closed. Their residents will come in droves.
Tell me the amount you want to bet on if Nevada will initiate a state income tax this year and name the representative or senator pushing this idea so we can vote them out.
- 6yRichard AndersonPro MemberProfessional · Batavia, IL · Member since 2016 · 107 posts · 39 votes
I work for a bank and we have begun to tighten our lending requirements. We are raising the minimum FICO on several of our lending products. I also read an article this morning JPMChase is no longer accepting HELOC applications and are raising their minimum FICO to 700.
Personally, my partners and I are having challenges with our private lenders. One is very late on fulfilling their draw payments. They are blaming it on the situation in NYC - even though we are in Chicago. My partner has a separate deal where his private lender completely backed out at the last minute. He is now scrambling to find other investors.
- Investor · Port Townsend, WA · Member since 2014 · 103 posts · 50 votes6y
I am curious, what % of Casino customers are In-State Resident vs. Out-of-State tourists in LV? I would hazard to guess that at least 50% of the tourists are retired people. Do you think people will get on the plane to come to LV to gamble without vaccine even in July/Aug...?
I would like the stay-at-home order lifted ASAP as well in the state of WA I live in but the news I see indicates that order won't be lifted until May 15. We are already seeing small businesses closing in our little town...this is terrible.
@casey rolland
Closing the entire economy is horrible and it mostly hurts the little guy. I owned a few computer stores for 15 years from the 90’s to the 00’s. We paid $8k/month in rent each. There is no doubt we would gone out of business if we were closed 60 days. My employees were like family but I couldn’t have afforded to pay them that long while closed, that would have sucked and has to be horrible for small companies today. I want to get out and spend money at every little place that survives to reopen. I’m going to go to 30 different restaurants in a month. I don’t know how far you are from Spokane but if I was there I’d stop at Rock Rocco’s pizza (big in Wisconsin and I usually visit the one in MN when I’m home)
A little more than 60% of our tourists drive here. The casinos off the strip are probably 80% drive in tourists and locals maye higher if they don’t host conventions. I think they’ll be desperate to come. Especially if California Indian casinos are still closed.
The only bright side for us is this may have been the only scale of disaster we needed to avoid the 2% sales tax increase to the highest in the country (a BILLION DOLLARS) the school district was asking for. I don’t THINK they’ll have the guts to still ask for it.
Ps. I will fly or drive home to MN to visit my family and take them out at least a few times as well as soon as it’s possible.
- Rental Property Investor · AZ · Member since 2013 · 213 posts · 50 votes6y
Originally posted by @Casey Rolland:
We are already seeing small businesses closing in our little town...this is terrible.
I am sorry to hear this. My dad lived in Sequim for several years and I had the good fortune to visit the lovely town of Port Townsend.
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