Financing for under 50k in Mississippi
Member since 2023 · 5 posts · 2 votes
Financing for under 50k in Mississippi
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Lender · Boston, MA · Member since 2023 · 415 posts · 95 votes
2yHi, Jonathan are all the properties in the same city/country of each other? If so I might be able to assist. I have sent you a PM.
28 Replies
- Lender · Boston, MA · Member since 2023 · 415 posts · 95 votes2y
Hi, Jonathan are all the properties in the same city/country of each other? If so I might be able to assist. I have sent you a PM.
- 2yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
I would look for a local lender in Mississippi, ideally community bank or credit union - these will be too small / low value for most national lenders to touch
Harpoon Capital514 Reviews - Member since 2023 · 5 posts · 2 votes2y
@Robin Simon Thanks for the info, we have been reaching out to local lenders. If they are the only ones capable of financing these transactions, would that mean it would directly affect DTI & cap our portfolio at 10 doors conventionally?
- 2yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 505 votes
If you're doing conventional loans then you will run into a cap and you have to worry about your DTI.
Generally, with DSCR loans, there is no cap of properties.
If you can make the ratio work, you can keep going.
Some DSCR lenders will go down to a $75K value and a $55K loan amount. It's the same work to do a $55K loan as a $500K loan so the fees will be higher due to the loan amount but will still be much lower than what a lender or broker gets paid on a higher loan amount.
DSCR loans won't use your income to underwrite the loan.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
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 < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Bright Skyline518 Reviews - Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes2y
Quote from @Jonathan Zheng:
Hi all,
I am currently eyeing a couple of individual SFH properties and a small 8-unit SFH portfolio. All of these SFHs cashflow great and have high CoC returns. They need minimal rehab to get to market. However, nearly every lender I've spoken to has a hard minimum of 50k-75k loan value, except for 1 which charges 15% to loan value in closing costs. I am planning on scaling out in this area very quickly, but it would not make sense without leverage.
Does anyone know a private lender, local bank, or credit union that can facilitate these transactions with reasonable fees?
Thanks in advance!
Unfortunately the credit unions in the area will only lend to owner occupied and not to investors. I tried to get lending from Hope Credit Union (one of the best ones in the area) to buy my son a townhouse on the NE side while he was in a PhD program at the Medical School. When they found out how much property i owned (and most of them were free and clear) they refused the loan. I eventually got a conventional loan but this was a property that cost 130K, not my rental properties which I bought in your price range. You might try Bank Plus or Trustmark. Unfortunately I can't offer you much hope in this area. Smaller mortgages are usually only available to owner-occupied where not lending brings accusations of red-lining, but it doesn't apply to investors.
- Member since 2023 · 5 posts · 2 votes2y
Thanks for the insight Susan - that's very helpful.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes2y
Quote from @Jonathan Zheng:
Hi all,
I am currently eyeing a couple of individual SFH properties and a small 8-unit SFH portfolio. All of these SFHs cashflow great and have high CoC returns. They need minimal rehab to get to market. However, nearly every lender I've spoken to has a hard minimum of 50k-75k loan value, except for 1 which charges 15% to loan value in closing costs. I am planning on scaling out in this area very quickly, but it would not make sense without leverage.
Does anyone know a private lender, local bank, or credit union that can facilitate these transactions with reasonable fees?
Thanks in advance!
Where in Jackson are you getting properties all in under 70k? I am picking up about 50 there all will be all in about 85k with proper reno, in the better areas. How much DP do you have ?
- Member since 2023 · 5 posts · 2 votes2y
Quote from @Bob S.:
Quote from @Jonathan Zheng:
Hi all,
I am currently eyeing a couple of individual SFH properties and a small 8-unit SFH portfolio. All of these SFHs cashflow great and have high CoC returns. They need minimal rehab to get to market. However, nearly every lender I've spoken to has a hard minimum of 50k-75k loan value, except for 1 which charges 15% to loan value in closing costs. I am planning on scaling out in this area very quickly, but it would not make sense without leverage.
Does anyone know a private lender, local bank, or credit union that can facilitate these transactions with reasonable fees?
Thanks in advance!
Where in Jackson are you getting properties all in under 70k? I am picking up about 50 there all will be all in about 85k with proper reno, in the better areas. How much DP do you have ?
Most of these properties are in C/D tier neighborhoods and are either off-market or overlooked on the MLS. The individual unit cost is low, so it would be necessary to bundle them together as a portfolio.
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
at that price point I am skeptical that they will "cashflow great"
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesthose price points are south jackson and West jackson..
Quote from @Bob S.:
Quote from @Jonathan Zheng:
Hi all,
I am currently eyeing a couple of individual SFH properties and a small 8-unit SFH portfolio. All of these SFHs cashflow great and have high CoC returns. They need minimal rehab to get to market. However, nearly every lender I've spoken to has a hard minimum of 50k-75k loan value, except for 1 which charges 15% to loan value in closing costs. I am planning on scaling out in this area very quickly, but it would not make sense without leverage.
Does anyone know a private lender, local bank, or credit union that can facilitate these transactions with reasonable fees?
Thanks in advance!
Where in Jackson are you getting properties all in under 70k? I am picking up about 50 there all will be all in about 85k with proper reno, in the better areas. How much DP do you have ?
- Member since 2023 · 5 posts · 2 votes2y
Quote from @Nicholas L.:
at that price point I am skeptical that they will "cashflow great"
Aside from the DD needed on each unit, the numbers work out after calculating expected gross rent (taken from comps and FMR) less the expenses associated with NOI & adjusted NOI - fall around a 25%-35% CoC return. Unless I am missing something, I don't see how most properties in SoJack don't cashflow.
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
do you have experience doing this?
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jonathan Zheng:
Quote from @Nicholas L.:
at that price point I am skeptical that they will "cashflow great"
Aside from the DD needed on each unit, the numbers work out after calculating expected gross rent (taken from comps and FMR) less the expenses associated with NOI & adjusted NOI - fall around a 25%-35% CoC return. Unless I am missing something, I don't see how most properties in SoJack don't cashflow.
they all cash flow on paper.. I started HML in Jackson on 2002 up till 2008.. did over 1k loans many times same house after first cash flow investor lost it and it got resold.
Sojack for sure cash flows on paper.. but thats fantasy land especially for an out of state investor I will not lend in that market ever again. NE jackson , Madison county Rankin county sure but those so called C neighborhoods are full of old homes and extremely tough to manage properties with very little choice of PM .. its simply in my mind one of the worst places for an out of state investor to buy. folks get sucked in by price points.. and paper tiger returns.. Even the local folks I lent to and know well find it very very tough day in and day out.. I just had one of my other clients who tried the market he did not last 12 months and he is already selling .. So you get what you pay for.. but give it a try maybe you will have better luck ..
there are reason so jack is the way it is.. it used to be all owner occ in the 60 70s etc. and I originally did fix and flip loans for owner occ there in 2002 and about 2004 it changed to 100% BRRR loans to out of area investors.. so ownership transformed from a nice mix of owner occ and rental to virtually every sale these days is investor.
Add on to that most fo the homes are older sitting on a big patch of Yazoo clay so foundations move all the time.. just a tough area.. spend a little more if you like Jackson and get up north of Lakeland and East of the 55 125k price points thats sustainable.. I owned about 20 new builds in Madision county those I did not even need PM for I managed them from Oregon with my staff.
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes2y
Quote from @Jay Hinrichs:
Quote from @Jonathan Zheng:
Quote from @Nicholas L.:
at that price point I am skeptical that they will "cashflow great"
Aside from the DD needed on each unit, the numbers work out after calculating expected gross rent (taken from comps and FMR) less the expenses associated with NOI & adjusted NOI - fall around a 25%-35% CoC return. Unless I am missing something, I don't see how most properties in SoJack don't cashflow.
they all cash flow on paper.. I started HML in Jackson on 2002 up till 2008.. did over 1k loans many times same house after first cash flow investor lost it and it got resold.
Sojack for sure cash flows on paper.. but thats fantasy land especially for an out of state investor I will not lend in that market ever again. NE jackson , Madison county Rankin county sure but those so called C neighborhoods are full of old homes and extremely tough to manage properties with very little choice of PM .. its simply in my mind one of the worst places for an out of state investor to buy. folks get sucked in by price points.. and paper tiger returns.. Even the local folks I lent to and know well find it very very tough day in and day out.. I just had one of my other clients who tried the market he did not last 12 months and he is already selling .. So you get what you pay for.. but give it a try maybe you will have better luck ..
there are reason so jack is the way it is.. it used to be all owner occ in the 60 70s etc. and I originally did fix and flip loans for owner occ there in 2002 and about 2004 it changed to 100% BRRR loans to out of area investors.. so ownership transformed from a nice mix of owner occ and rental to virtually every sale these days is investor.
Add on to that most fo the homes are older sitting on a big patch of Yazoo clay so foundations move all the time.. just a tough area.. spend a little more if you like Jackson and get up north of Lakeland and East of the 55 125k price points thats sustainable.. I owned about 20 new builds in Madision county those I did not even need PM for I managed them from Oregon with my staff.
I've done well in South Jackson as you know, but I was local until the pandemic forced me out to California. In fact I lived in the neighborhood where I owned most of my property. My property manager is also my real estate agent who I've been working with for twelve years and her husband handles most of the repairs. As for foundation problems, I know people in Madison County living in 300K plus houses that have foundation issues; big ones! Paying a lot for a property will not guarantee you'll be free of foundation issues. In fact I figure that if a house hasn't moved in the last sixty years it probably won't, but it is something you have to watch out for and I've gotten really good at that. One thing you will find is that tenants in C neighborhoods often pay the rent in cash. They often don't have checking accounts, so it really does need to be a PM you can trust and I don't trust any of the big PM companies in Jackson. I've seen houses with them stand vacant for months and just disintegrate before my eyes. One thing you *cannot* count on in Jackson is appreciation. This post-pandemic period is the only time I've seen property values increase substantially since the immediate aftermath of Hurricane Katrina and that was because New Orleans didn't fit into Jackson. One other thing to watch out for, C neighborhoods have bigger lots usually 1/4 of an acre and lots of trees. That is one of the things that attracted me to the neighborhood where I bought my own house and later investment properties. What I eventually found out is that those trees are not your friend. In the middle of June a strong straight windstorm came through and damaged four of my properties. The good news is that labor is so cheap in Mississippi the insurance company paid me more than the repairs cost.
Mind you, I taught for 20 years at a historically black university in Jackson. My salary never even reached 60K but thanks to my real estate investments I managed to retire a millionaire. It can be done, but you have to be very, very careful and that is harder to do when you are out-of-state. The properties I sold post-pandemic all came with my husband/wife team (who also lives in the neighborhood) so I think they will do fine.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Susan Maneck:
Quote from @Jay Hinrichs:
Quote from @Jonathan Zheng:
Quote from @Nicholas L.:
at that price point I am skeptical that they will "cashflow great"
Aside from the DD needed on each unit, the numbers work out after calculating expected gross rent (taken from comps and FMR) less the expenses associated with NOI & adjusted NOI - fall around a 25%-35% CoC return. Unless I am missing something, I don't see how most properties in SoJack don't cashflow.
they all cash flow on paper.. I started HML in Jackson on 2002 up till 2008.. did over 1k loans many times same house after first cash flow investor lost it and it got resold.
Sojack for sure cash flows on paper.. but thats fantasy land especially for an out of state investor I will not lend in that market ever again. NE jackson , Madison county Rankin county sure but those so called C neighborhoods are full of old homes and extremely tough to manage properties with very little choice of PM .. its simply in my mind one of the worst places for an out of state investor to buy. folks get sucked in by price points.. and paper tiger returns.. Even the local folks I lent to and know well find it very very tough day in and day out.. I just had one of my other clients who tried the market he did not last 12 months and he is already selling .. So you get what you pay for.. but give it a try maybe you will have better luck ..
there are reason so jack is the way it is.. it used to be all owner occ in the 60 70s etc. and I originally did fix and flip loans for owner occ there in 2002 and about 2004 it changed to 100% BRRR loans to out of area investors.. so ownership transformed from a nice mix of owner occ and rental to virtually every sale these days is investor.
Add on to that most fo the homes are older sitting on a big patch of Yazoo clay so foundations move all the time.. just a tough area.. spend a little more if you like Jackson and get up north of Lakeland and East of the 55 125k price points thats sustainable.. I owned about 20 new builds in Madision county those I did not even need PM for I managed them from Oregon with my staff.
I've done well in South Jackson as you know, but I was local until the pandemic forced me out to California. In fact I lived in the neighborhood where I owned most of my property. My property manager is also my real estate agent who I've been working with for twelve years and her husband handles most of the repairs. As for foundation problems, I know people in Madison County living in 300K plus houses that have foundation issues; big ones! Paying a lot for a property will not guarantee you'll be free of foundation issues. In fact I figure that if a house hasn't moved in the last sixty years it probably won't, but it is something you have to watch out for and I've gotten really good at that. One thing you will find is that tenants in C neighborhoods often pay the rent in cash. They often don't have checking accounts, so it really does need to be a PM you can trust and I don't trust any of the big PM companies in Jackson. I've seen houses with them stand vacant for months and just disintegrate before my eyes. One thing you *cannot* count on in Jackson is appreciation. This post-pandemic period is the only time I've seen property values increase substantially since the immediate aftermath of Hurricane Katrina and that was because New Orleans didn't fit into Jackson. One other thing to watch out for, C neighborhoods have bigger lots usually 1/4 of an acre and lots of trees. That is one of the things that attracted me to the neighborhood where I bought my own house and later investment properties. What I eventually found out is that those trees are not your friend. In the middle of June a strong straight windstorm came through and damaged four of my properties. The good news is that labor is so cheap in Mississippi the insurance company paid me more than the repairs cost.
Mind you, I taught for 20 years at a historically black university in Jackson. My salary never even reached 60K but thanks to my real estate investments I managed to retire a millionaire. It can be done, but you have to be very, very careful and that is harder to do when you are out-of-state. The properties I sold post-pandemic all came with my husband/wife team (who also lives in the neighborhood) so I think they will do fine.
I know we have discussed this over and over through out the years here. hyper local self manage and maintain and so on and so forth one can make a go of it. Out of state or trusting others to manage your properties in so jack or west jack its going to be a very few folks that will after time will look at these investments as a success.. I have had homes i made loans on only to come back 8 months later and they had been destroyed by vandals and city demo them.. There are pockets of so jack but the streets were at todays dollars your all in for 50 to 70k PP and rehab are going to be on the better streets those will be very poorly builit and maintained rentals.
Katrina in my mind changed SO Jack negatively with the influx of lower class new Orleans renters who did not have history in SO Jack brought with them bad families and crime.
I understand Yazoo clay very well as U know its something really .. and if you dont maintain your drainage around your house U stand a very good chance of having your foundation go wonky. And your correct its everywhere in and about Jackson metro area.. Although the new builds out in Madison that I owned the builders excavated down and then filled and compacted and put in proper drainage.. the houses in So jack that are 30 to 60 years old are simply not built to the same standards.
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes2y
I wouldn't put South Jackson in the category as West Jackson. I avoid West Jackson myself. I think your investments that went bad were mostly in the 39204 zip code. 39212 is somewhat better. I am not seeing any good properties out there for 50K anymore, but you can find some decent ones for 70K still if you know where to look. These are not poorly built houses but they are older homes built in the '60's. And you are right you have to be *very* careful about getting a decent PM because a vacant home won't survive long in Jackson.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Susan Maneck:
I wouldn't put South Jackson in the category as West Jackson. I avoid West Jackson myself. I think your investments that went bad were mostly in the 39204 zip code. 39212 is somewhat better. I am not seeing any good properties out there for 50K anymore, but you can find some decent ones for 70K still if you know where to look. These are not poorly built houses but they are older homes built in the '60's. And you are right you have to be *very* careful about getting a decent PM because a vacant home won't survive long in Jackson.
Susan I never owned or lent in West Jackson full stop it was all South Jackson between Terry Road and McDowell and all the other main streets there.. I stand by my assessment of the area and since i personally owned over 200 homes there I saw first hand how tough it is to own and manage those.. I Sold out about 7 or 8 years ago and that company made it about 18 months before they had to file BK and the houses that were still standing and not trashed were liquidated for pennies on the dollar.
- Member since 2022 · 40 posts · 34 votes2y
As someone from out of state, Jackson scares me as an investor. It has the outward appearance of a blighted market, on par with places like Gary, IN or Detroit, MI. The shear volume of tax liens that I saw on auction there a month or so back was stunning. Visually, it looked as though 50-60% of some neighborhoods were up for tax auction. Even now there are SFH available as tax forfeited properties for a couple thousand dollars. To me, this speaks volumes about the local market. I am sure locals would be able to sift through the area to find the gems in the rough, but I can see why out of staters need to yield caution.
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes2y
Quote from @Jay Hinrichs:
Quote from @Susan Maneck:
I wouldn't put South Jackson in the category as West Jackson. I avoid West Jackson myself. I think your investments that went bad were mostly in the 39204 zip code. 39212 is somewhat better. I am not seeing any good properties out there for 50K anymore, but you can find some decent ones for 70K still if you know where to look. These are not poorly built houses but they are older homes built in the '60's. And you are right you have to be *very* careful about getting a decent PM because a vacant home won't survive long in Jackson.
Susan I never owned or lent in West Jackson full stop it was all South Jackson between Terry Road and McDowell and all the other main streets there.. I stand by my assessment of the area and since i personally owned over 200 homes there I saw first hand how tough it is to own and manage those.. I Sold out about 7 or 8 years ago and that company made it about 18 months before they had to file BK and the houses that were still standing and not trashed were liquidated for pennies on the dollar.
Terry Road runs north and south, but I think you mean the area just north of McDowell which is the 39204 zip code. Anything south of McDowell is 39212 which is where my houses are located. I actually checked out one of the properties that company had when it went bankrupt on behalf on one of its investors. The house wasn't trashed but I think the guy had invested too much money into it. I suggested he hang on to it because it was rented Section 8 and was at least cash flowing. There are some bad areas of 39212 but the only good area of 39204 I can think of is Alta Woods. Those homes are old but they were extraordinarily well-built.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Susan Maneck:
Quote from @Jay Hinrichs:
Quote from @Susan Maneck:
I wouldn't put South Jackson in the category as West Jackson. I avoid West Jackson myself. I think your investments that went bad were mostly in the 39204 zip code. 39212 is somewhat better. I am not seeing any good properties out there for 50K anymore, but you can find some decent ones for 70K still if you know where to look. These are not poorly built houses but they are older homes built in the '60's. And you are right you have to be *very* careful about getting a decent PM because a vacant home won't survive long in Jackson.
Susan I never owned or lent in West Jackson full stop it was all South Jackson between Terry Road and McDowell and all the other main streets there.. I stand by my assessment of the area and since i personally owned over 200 homes there I saw first hand how tough it is to own and manage those.. I Sold out about 7 or 8 years ago and that company made it about 18 months before they had to file BK and the houses that were still standing and not trashed were liquidated for pennies on the dollar.
Terry Road runs north and south, but I think you mean the area just north of McDowell which is the 39204 zip code. Anything south of McDowell is 39212 which is where my houses are located. I actually checked out one of the properties that company had when it went bankrupt on behalf on one of its investors. The house wasn't trashed but I think the guy had invested too much money into it. I suggested he hang on to it because it was rented Section 8 and was at least cash flowing. There are some bad areas of 39212 but the only good area of 39204 I can think of is Alta Woods. Those homes are old but they were extraordinarily well-built.
area we invested and loaned in was south of 20 west of 55. and south of byrum sojack. had some in alta woods as well. we did nothing south of 20 and east west of 55 other than fondren or bellhaven and the little pockets there. NE jackson north of lakeland and East of the 55 generally all that was quality product. but you could not buy those for the prices that houses in so jac sell for.
- Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes2y
Huh? Byram is south of Jackson, it is not even in the city limits. It's a nice area, though.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Susan Maneck:
Huh? Byram is south of Jackson, it is not even in the city limits. It's a nice area, though.
I know I owned a new construction in Byrum it borders South Jackson to the south.
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
Where did OP go? =)
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Nicholas L.:
Where did OP go? =)
he sent me over the house he was thinking of.. it was in West Jackson as I surmized.. without central air and heating.. he did not realize you cant get section 8 in Jackson without those. Vaca t lot next to it broken down car.. you know hood rat.
But I will let him reply if he feels he wants or needs to follow up.
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