20 year Loan officer and RE investor. What questions can I answer?

Question

Here to help so ask away....

Kelby Schimming · Answer

Hi Kenny,

I have found a potential private money lender to lend me 20% of purchase price for down payment. I plan to finance the other 80% using a commercial loan. This will be a turnkey rental. How do I offer the private money lender a security on this property as I plan to hold it long term?

Put him as a second lien on the property?

Any feedback is appreciated.

Thanks in advance.

Kenny Simpson · Answer

Hi @Tychua G. thanks for reaching out.  Are you asking if you purchase a property, then want to turn around and purchase another one how fast can you do that and what are the requirements for using rental income on one or both properties to offset mortgage payment and help with DTI?

Andrew Postell · Answer

@Brennan Guiles thanks for the post here.  The right answer here is based on what you are trying to do.  Meaning, if you are going to flip properties...then that's a very different lender than if you are going to buy long term rentals off the MLS.   Since this is the "Conventional Mortgage" forum that usually means we are doing long term rentals so I will answer this from that perspective.

I wrote an entire post on this topic, including all of the questions you should be asking your lenders, that you can find HERE.  Feel free to post there with any questions but we've been using that post for many years and it still holds up.

Thanks!

Kenny Simpson · Answer

@Brennan Guiles this really depends on what you are looking for and purchasing. If you are investing in real estate, having a lender that is an actual investor and has worked with thousands of investors is going to a big benefit. To many people focus on rate, rate, rate, I am not worried about someone shopping me because I am a mortgage broker and we typically have the best rates or close to it. Find a lender that can do it all when it comes to working with buyers, has a team so someone is always available, can close on time, can fix problems quickly when they come up, has the experience to coach you through a deal, has lots of products/lenders to offer and the list goes on. Having a great team around you made up of great loan officer, agent, insurance, title, escrow, property inspector, contractor, etc his the most important when purchasing which is most peoples biggest asset. Rates, escrow waivers, how long yo can lock, these are all the simple things that any lender can help you with. Having a track record, experience and the knowledge is much more valuable.

Hope this helps!

Namal Burman · Answer

Here is my situation. I have been in San Diego for last 21 years. Own 2 rentals(One condo in 92126 in @2009,One townhome in 92127 @2013 both properties are cash flow +ve ) and own a primary residence. I have around $1.5M in Mortgage debt locked at below 3% 30 year fixed. i have stable income from a big cellular company in San company so i have stocks. Now what would one do to increase my assets buy another rental property or do ??

Kenny Simpson · Answer

Can you DM or email me your scenario.  We have done many DSCR loans in remote areas in the US.  I am sure I can help

William Gerald · Answer

Is there a DSCR lender that will lend in rural designated areas? Properties would be located in TN.

Thanks!

Kelby Schimming · Answer

Thanks for the feedback! I have managed to get the seller finance to 80% of the sale price and plan to have private money cover the other 20%. I need to figure out a clean and clear way to secure the private money to something, so they have the confidence and security they are looking for in lending.

I do have other properties that have enough equity to cover the 20%. I am not sure if adding the private lender to the second position on a different property is the best way to go. The lenders on these properties are banks. If I were to secure it against my target property, I guess I would have to get permission from the seller to have the second lien?In reality, I'd rather just personally guarantee it and pay back with my W2 in 6-12 months. My lender knows I could do this, it's just he wants some sort of security just in case I have a run in with a bus or something.

Kenny Simpson · Answer

The only way is by rental income or if you make enough to offset.  DSCR is another options as rates might not be that much different.

Tychua G. · Answer

@Kenny Simpson The latter, I believe the main bottleneck for scaling a portfolio using Conventional products stem from accruing recurring mortgage debt payments.  I'd like to know if there are ways to offset this.

20 year Loan officer and RE investor. What questions can I answer?

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