Non Owner Occ,SFR loan rates (July 2022) too high to cash flow?

[Joe Yobaccio]

I am getting both conventional and non QR rates for non owner occ, sfr rates of above 6 for amortized loans and 6.75-6.99 for interest only loans, all non owner occupied and with 1/3rd down.  Even with $3400 month rents in CA or $2600/mo rents ini TX, the cash flow is nearly gone.  The t ax, insurance, maintenance, prop management and the higher interest loan are not penciling.  I wanted to see what kind of rates you are seeing and where you had to hunt to get lenders who offered lower rates or if everything is tied to the FED rate hikes.

[Robin Simon]

Its definitely a very challenging time to get some of these properties to cash flow, playing out exactly as you are describing above. Looking to duplexes or triplexes (vs. SFR), being able to stomach pretty high points 2,3, or even 4 to get the rate down or just being aggressive on offers under asking are some things that might make sense

[Jack Mawer]

Joe, rates are rising and we should expect to see more of this after we hear from the new FED meeting today. I would expect to see rates in the 7's in the near future...

[Matthew Crivelli]

Most Non QM 30Y investment loans are over 7% for most of the U.S. You are not alone, DSCR loans in markets like CA, CO, AZ and others are near impossible to get done at high LTV. I have people call me who can't sell the home and want to refi, only to find out this is really not an option with current market rents. The credit markets have really tightened up. @Joe Yobaccio

[Madeline Malinovsky]

There's a saying lenders often use which is "marry the house and date the rate". As corny as it sounds, it does hold true. The range of rates you're finding is right for the current market, and as other posters noted, things could go up with the FED accountment today. That said, if it's the right place for every other reason, then I would go for it. A lot of major economists still predict rates falling within the next 12 months. Something I don't see talked about as much is China's currency crisis. They are currently experiencing bank runs en masse and clients refusing to make payments on their loans en masse. Either issue alone could easily collapse a banking system, and if China is unable to fend off the collapse, it would be horrible news for the world economy and cause severe economic hardship for anyone who relies on them for trade and commerce. This type of horrible news is what would bring rates down in the US (as negative economic news always does) along with all the capital that moves to the US in order to escape the risks posed by a potentially collapsing economy. All that to say, it would be horrible for the broader world if the Chinese are not able to fend off such a collapse, but we would likely see rates drop. 

[Nick Belsky]

@Joe Yobaccio

A few things here... the conventional pricing you are getting is really high.

Just ran $400,000 purchase price on a investment SFR in Texas, 30% down, 700 FICO and am getting pricing at 5.750% with $2,280 in Lender CREDIT, no buy down, no lender origination costs. $1,634 P+I Payment.

Second, higher rates do cut into margins, obviously, but you have to be more creative and look at your other expenses that you can control.  Can you reduce anywhere else?  Remember, investors not so long ago made numbers work with lower rents and rates in double digits... If rates alone is killing your deal, then its a bad deal to begin with or you are focusing too much on one piece of the equation.

Cheers!