DSCR Loan for $465K with 300K cash down-DENIED

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

For EMD you should have a financing contingency unless it was waived. If the lender denies your loan you'll need a loan denial to protect yourself. I am not familiar with group homes but it seems lending is tough. DSCR loans are usually for long term rentals so I can imagine an underwrite would have an issue with a group home. Is there a small bank you can meet? If you can prove your track record I think you'd have better luck.

1 Reply

Brandon BeardtPro Member

Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes

3y

Quote from @Amy Konopka:

I've been working with a lender who will not lend to me since my original intent was to create another Recovery Residence. Credit score high 700s. Other property cash flows a couple grand/month.

I told them-OK--I'll rent out to a family, totally easy to pivot. 8Br/5 bath house gated community in Murrieta, CA.

Appraisal already done. Comps out at $4400/month rent. On affordablehousing.net for 5K

Lender makes me sign docs promising its not a recovery residence despite having contracts and guaranteed notes from the County to fill the beds and more than adequately pay them back. Okey Dokey.

I think I can get the sellers to hold off 30 days while I find a more open minded lender.

1. Is there a certain amount of time I'm granted when it comes to lending? I put my $7650 in EMD down.

2. Is there a DSCR lender out there who isn't afraid of this Housing Model? If so, i'd like to connect because I do plan on scaling.

Hi Amy,

Your contingencies on the purchase contract protect you from events such as this. A loan/financing contingency would give you the opportunity to pull out of the deal if the lender couldn't pull through. That being said, as Caleb mentioned, if the contingency is waived, then you are no longer protected.

[email protected]818-726-2418

2 Reply

Brittany MinocchiBusiness Member

Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes

3y

Hi @Amy Konopka

Interesting situation! As others have mentioned, there should be something written into your agreement in regards to the EMD. I'm always up for a challenge, so I'll check around on the recovery housing hurdle and see if I can find something for you.

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Amy Konopka

OP

Member since 2021 · 65 posts · 35 votes

3y

My RR business (SMLLC) would not be owning the property. I am. The property is then placed in a separate MMLLC, by me the landlord -which will then be placed in a holding company for added liability protection.

My RR Business rents the properties (from me) then furnishes it, pays the utilities and finds "roommates". The Biz collects the individual rents and uses that to pay the rent on their one year lease to the landlord(me). Its basically arbitrage.

Most recovery Residence operators don't own, alot are in Recovery themnselves and are comfortable with and see the value of social model recovery. They rent from landlords who are knowledgeable about how awesome this model is. The house is mainatined and kept immaculate (as long as they rent to a responsible operator), the guests have a curfew and if they are a problem they are immediatley removed from the house. Absolutely no loud parties. I walk in that house unannounced at least two times a week--and the people there are HAPPY to see me.

There is a live-in house manager who basically is like the Den Mother who keeps these super grateful people in line and on the right track (at least mine does) Most people only know what their moms and grandparents know about these "halfway houses". Andf thats fine--they don't need to be in this business. Its not for everyone.

1 Reply

Amy Konopka

OP

Member since 2021 · 65 posts · 35 votes

3y

Quote from @Brandon Beardt:

Quote from @Amy Konopka:

I've been working with a lender who will not lend to me since my original intent was to create another Recovery Residence. Credit score high 700s. Other property cash flows a couple grand/month.

I told them-OK--I'll rent out to a family, totally easy to pivot. 8Br/5 bath house gated community in Murrieta, CA.

Appraisal already done. Comps out at $4400/month rent. On affordablehousing.net for 5K

Lender makes me sign docs promising its not a recovery residence despite having contracts and guaranteed notes from the County to fill the beds and more than adequately pay them back. Okey Dokey.

I think I can get the sellers to hold off 30 days while I find a more open minded lender.

1. Is there a certain amount of time I'm granted when it comes to lending? I put my $7650 in EMD down.

2. Is there a DSCR lender out there who isn't afraid of this Housing Model? If so, i'd like to connect because I do plan on scaling.

Hi Amy,

Your contingencies on the purchase contract protect you from events such as this. A loan/financing contingency would give you the opportunity to pull out of the deal if the lender couldn't pull through. That being said, as Caleb mentioned, if the contingency is waived, then you are no longer protected.

ok good I don't want to pull out! There is still a loan contingency on it--so basicvally I can take 30 days to start working on another loan-maybe with a credit union this time.

0 Reply

Robin SimonBusiness Member

Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes

3y

Quote from @Amy Konopka:

I've been working with a lender who will not lend to me since my original intent was to create another Recovery Residence. Credit score high 700s. Other property cash flows a couple grand/month.

I told them-OK--I'll rent out to a family, totally easy to pivot. 8Br/5 bath house gated community in Murrieta, CA.

Appraisal already done. Comps out at $4400/month rent. On affordablehousing.net for 5K

Lender makes me sign docs promising its not a recovery residence despite having contracts and guaranteed notes from the County to fill the beds and more than adequately pay them back. Okey Dokey.

I think I can get the sellers to hold off 30 days while I find a more open minded lender.

1. Is there a certain amount of time I'm granted when it comes to lending? I put my $7650 in EMD down.

2. Is there a DSCR lender out there who isn't afraid of this Housing Model? If so, i'd like to connect because I do plan on scaling.

Generally, DSCR Lenders would be open to this model (at least some), however the bigger issue is likely the 8 bedroom / 5 bathroom nature of the property tbh. 8-bedroom houses are challenging for comps in most areas and that could lead to the property only being able to be used for this model, instead of convertible easily to a liquid market of buyers including those that would owner-occupy. This is more likely going to be your issue

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Stephanie P.Pro Member

Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes

3y

Quote from @Amy Konopka:

I've been working with a lender who will not lend to me since my original intent was to create another Recovery Residence. Credit score high 700s. Other property cash flows a couple grand/month.

I told them-OK--I'll rent out to a family, totally easy to pivot. 8Br/5 bath house gated community in Murrieta, CA.

Appraisal already done. Comps out at $4400/month rent. On affordablehousing.net for 5K

Lender makes me sign docs promising its not a recovery residence despite having contracts and guaranteed notes from the County to fill the beds and more than adequately pay them back. Okey Dokey.

I think I can get the sellers to hold off 30 days while I find a more open minded lender.

1. Is there a certain amount of time I'm granted when it comes to lending? I put my $7650 in EMD down.

2. Is there a DSCR lender out there who isn't afraid of this Housing Model? If so, i'd like to connect because I do plan on scaling.

I think you're making this too complicated for the eventual lender. They don't need to know what type of business you're renting to. There is no lease in place yet (because you don't own the property and your RR business isn't in there yet), so they'll have to go off of market rents for the DSCR number. If that works for the loan amount and rent and LTV they're allowing, you should be good. Then rent it to whomever you like (including yourself) if zoning allows.

2 Reply

Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

3y

Quote from @Amy Konopka:

I've been working with a lender who will not lend to me since my original intent was to create another Recovery Residence. Credit score high 700s. Other property cash flows a couple grand/month.

I told them-OK--I'll rent out to a family, totally easy to pivot. 8Br/5 bath house gated community in Murrieta, CA.

Appraisal already done. Comps out at $4400/month rent. On affordablehousing.net for 5K

Lender makes me sign docs promising its not a recovery residence despite having contracts and guaranteed notes from the County to fill the beds and more than adequately pay them back. Okey Dokey.

I think I can get the sellers to hold off 30 days while I find a more open minded lender.

1. Is there a certain amount of time I'm granted when it comes to lending? I put my $7650 in EMD down.

2. Is there a DSCR lender out there who isn't afraid of this Housing Model? If so, i'd like to connect because I do plan on scaling.

If the property is vacant, you are better off using an equity based, Commercial Loan. No DSCR required, and the property does not have to be leased out. Also no Market rent appraisal required. The rate is high though, 9.99%-11.99% on a 30 year fixed mortgage.

[email protected]818-269-7983

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Amy Konopka

OP

Member since 2021 · 65 posts · 35 votes

3y

Exactly, and it was brought up to me that that I’m being denied lending because of the class of people I wish to rent to. It wasn’t an issue until they found out via my website that I’ll rent to what is actually a protected class. Recovery residences serve people with disabilities.

0 Reply

Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

3y

Quote from @Amy Konopka:

Exactly, and it was brought up to me that that I’m being denied lending because of the class of people I wish to rent to. It wasn’t an issue until they found out via my website that I’ll rent to what is actually a protected class. Recovery residences serve people with disabilities.

Redlining at its finest. What kind of lender is this?

[email protected]818-269-7983

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Shiloh LundahlPro Member

Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

3y

@Amy Konopka I have worked with my buddy @Tim Fazio on funding a deal I am doing which is a rent by the room model. You go through an application process where they take a look at your finances and your experience and then they can fund several deals for you. I hope that info is helpful for you. He has been very helpful for me.

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Adam Bartling

Lender · Rosenberg, TX · Member since 2022 · 287 posts · 130 votes

3y

@Amy Konopka Not 100% sure why you are getting jerked around. This is why we have many wholesale relationships. Not all lenders like the same asset classes or regions.

I would like to take a look and see if we can fund your deal.

If we can not fund, it will because mismatch of APV to PP and Rent, not because of how you combed your hair today.

Talk soon.

1 Reply

Simmy AhluwaliaPro Member

Lender · Atlanta, GA · Member since 2015 · 1k+ posts · 200 votes

3y

@Amy Konopka - Let's connect. We have "social impact/community" based financing, and especially in CA.

1 Reply

Lauri Hines

Member since 2018 · 2 posts · 1 vote

3y

This sounds like it may qualify for an SBA loan. Only 10% down if you qualify. Check with a commercial SBA lender in your area to see.

1 Reply

Zach Wain

Scottsdale, AZ · Member since 2019 · 435 posts · 248 votes

3y

Quote from @Stephanie P.: