This is my first deal. I was going to invest my business time in the renovations needed in order to get it ready for sale. I do have three families that want this property if I can get it bought and renovated. It will be a bidding war for this home. All three want it very badly, I just need the funds to get it bought and renovated. Low end profit is around $80,000
If you're looking to buy a property that's not move-in ready:
You can get a fix and flip loan for an investment property with up to 90% of the purchase price and 100% of the rehab budget with up to 75% of the ARV. The borrower is coming in with only 10% of the down payment if approved. The number usually varies from 10-20% depending on credit score, property analysis, etc.
Some lenders will work with any level of investor experience, credit scores as low as 660 and can close in as little as 10 days (there are loan options for 640-660 credit scores- they require 20% down).
Another good thing is interest only and 6-24 month loan terms- you can refinance by selling or refinancing to a long term DSCR rental property loan at any time once you complete the rehab.
Once the property is ready you can sell it or if you want to keep the property as a long term investment, you can underwrite the loan based on your income /debt to income (DTI) ratios or you can go the DSCR route where the loan is underwritten based on the actual or market rents from the appraisal.
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.
Have a home I'd like to buy and do a quick fix and flip. Also looking at additional single family homes that would make great profits for us both.
@Lyle Alan Young - Hi Lyle. Sounds like an exciting opportunity. Would love to learn more about what you are looking for specifically. If the numbers makes sense and the credit is decent there are options for you that would only require up to a 10% down payment and up to 100% of the renovations could be funded.
Have a home I'd like to buy and do a quick fix and flip. Also looking at additional single family homes that would make great profits for us both.
Get in touch with Tim Bishop with Longhorn Investments - he's in Arkansas and an investor himself. A simple web search and you will find him on the main site. Potentially 100% financing on both purchase and rehab.
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