Am I the Only One Wasting Hours Comparing FHA vs Conventional vs DSCR on Every Deal?

Question

Hey, guys and gals!

Okay, so I just spent 2 hours analyzing ONE property across different loan types. Had to use 4 different calculators, re-enter the same data each time, and manually compare results in a spreadsheet.

My workflow:

• BiggerPockets calculator for conventional
• FHA.com calculator for FHA loans
• Random DSCR lender site for non-QM
• Excel to compare everything side-by-side
• Rip my hair out...

I'm curious how everyone else handles this. Are you all jumping between multiple calculators like I am, or have you found something that actually handles different loan types? I feel like I'm spending more time on data entry than actual analysis at this point - literally typing the same address and purchase price into 3-4 different websites. I know I could make an "all encompassing" spreadsheet,

And honestly? I've started being pretty selective about when I'll run DSCR numbers. Unless the deal specifically needs non-QM financing, it's hard to justify the extra time hunting down a lender calculator and figuring out their specific requirements just to compare it against conventional. Seller financing is another one - great option in theory, but modeling those scenarios takes forever so I only do it when the seller explicitly mentions it.

I'm betting I'm leaving money on the table by not exploring every financing angle, but there's only so many hours in the day. Anyone else being strategic (or lazy?) about which financing options you actually take time to analyze? Or is there some tool out there that makes this comparison process less painful that I just haven't discovered yet?

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Patrick Roberts · Answer

youre doing something wrong. Crunching the numbers on a residential deal shouldnt take more than ten minutes once youve built a decent model in excel. It's researching and finding the info for the inputs that takes the longest. What exactly are you doing for each loan?

Alecia Loveless · Answer

@Scott Johnson Hi Scott. I’ve got a solid relationship with a great lender and while I could probably find slightly better terms somewhere else the convenience of always having the same point of contact, always being able to talk to a decision maker if I need help, and having a lender who values me and my business just wins out every time over trying to get the lowest possible rate with hours of comparison.

I might be leaving some money on the table by doing this but ultimately I feel like it’s a much more solid plan than going with some mystery lender I know nothing about.

Peter W. · Answer

I add 1% to the interest rate zillow suggests and use those numbers.  Ultimately it just comes down to is the rent ~$500 more than what I guess PITI or not and would I move my family into the neighborhood.  My estimate of PITI really only needs to be right to the nearest $50/mo (and usually comes in high).  50/mo is $600/year.  If $600/year breaks your 300k investment you have bigger issues on hand.

Sam Page · Answer

On gross yield, it's even more rudimentary than your description. Basically, you could use a ~40% expense ratio to figure out your yield on cost. So, if I buy something at a 16% gross yield, I'm at a 9.6% YOC (unlevered). Interest rates for our bulk refis are coming at 5T + 3.15%...so if I priced it today it's at 6.71% give or take. I know that will cash flow. I don't need to build out a full model on a house because I know our existing expense ratios and cost of capital. It's a simplified metric to help me find out if a house is worth spending any amount of time on. Nothing wrong with targeting CoC returns, but sometimes my CoC is infinite (we can be in a property for $0 out of pocket, and actually get some money back at refi). I guess if you wanted to be more intellectually honest, you could argue whatever equity I believe we've created through the value add (that difference between my basis and ARV), and use that as my denominator on the CoC and see if that's an acceptable figure (and if I would be better off realizing that gain and doing something else with it). We don't think of it this way for our business as we are aggregating 1000s of homes and have a long duration time horizon.

Stacy Raskin · Answer

This really depends on if you are going to live in the unit or not. VA and FHA loans are for owner occupied units. There are conventional investment property loans- there will be more paperwork than a DSCR loan. Conventional is also structured based on your DTI ratios and DSCR is structured on the actual or projected rent schedule (depending on if occupied or not at purchase). It really depends on your specific situation- occupancy, credit score, down payment, DTI as to what loan product would be best. Happy to connect to discuss further.

Scott Johnson · Answer

I guess it goes back to the "what if I keep hounding them about deals" when I'm hunting for one. Feel like they'd get tired of me after a while. It's also the impatience/timeline aspect of it, I guess. If I request the info from the lender and I don't hear back and lose the deal, what have I gained?

Reaching out to the lender seems to be the consensus for a lot of members.

Marcus Auerbach · Answer

You seem to be LIS - lost in spreadsheets. And I assume that extends beyond the financing part. The vanilla advice on BP is to trust your numbers, but if that's your ONLY criteria, it will lead to really stupid decisions. Spreadsheets give you a false sense of accuracy. I can "prove" to you on a spreadsheet whatever I want by tweaking 5 or 6 assumptions, each one just a little. Same with financing.

I would recommend flip it arround: run your numbers dry (without an actual address) and then know exactly what you are looking for and it changes your decision-making process. What you currently do results in a number, but you will always feel it could be better. If you run your numbers first and then evaluate a listing against it it's a clear pass/fail. It meets your criteria or it doesn't.

James Mc Ree · Answer

You might be experiencing "analysis paralysis." Do you gain material knowledge in running the borrowing scenario 4 different ways? (As mentioned above, VA and FHA are for owner occupied only, so BP just saved you half your time there!)

I have an Excel model that takes basic inputs which includes 1 set of projected PITI payments and gives me an incorrect estimate of how the property will perform every time. Incorrect? Yes, absolutely. All models are wrong, but some are useful. I find this one useful to decide if I want to step further into this deal opportunity or discard it. I am not trying to calculate the return to dollars and cents.

My guess is you might be trying to sharpen your pencil too much and it is wasting your time. The variability of your renovation costs probably far exceeds the accuracy you might get from your model and your model probably only contains a guess at the renovation costs. My suggestion is to spend less time in the modeling and more time in the properties to get a feel for what they need, income potential and expense to get there.

Erik Estrada · Answer

Hey Scott,

Is there a reason why you are running 4 different loan options? Is this an owner-occupied purchase or non-owner occupied purchase?

Erik Estrada · Answer

Most brokers can provide a quote for all 3 options

Am I the Only One Wasting Hours Comparing FHA vs Conventional vs DSCR on Every Deal?

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