DSCR Refinance Options on a BRRRR
Member since 2020 · 2 posts · 1 vote
DSCR Refinance Options on a BRRRR
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Member since 2020 · 37 posts · 24 votes
3yQuote from @Account Closed:
Great information. I appreciate getting several good options to consider.
A couple of follow-up questions/thoughts:
Is the 40% equity left in a deal doing anything for me other than looking good on a balance sheet?
I like the idea of a business line of credit as using the equity if/when needed. Interesting if that going to impact my income-to-debt ratio when I cash-out refinance the next one. Is a business line of credit available if the rental income isn't there?
Once again, thanks for the ideas and this gives me some good starting points to research.
Hi Eric
I have all my rentals in Bradenton, next to you. House's prices still high, In a decent neighborhood ARV will be above $400,000, its hard to find the property that property that qualified to the 1.1 % ratio, with the high interest rate and cash flow, without leaving all the cash in, which defeat the BRRRRR.
I just finished out a cashout refi , Bought the house for $270,000 with hard money at 10% in August 2022, b- c neighborhood, Before to bought it , I made sure that it can be rent out for $ 3000 a month. I rehab it with $ 50,000, rent it out in November and started the process to Cashout in November as well, The appraisal came to $ 385,000 , $ 10,000 to $ 15,000 below expected ,but with this market I just went along. My new mortgage is $ 2,400 included ins and tax, 7.99% 7y arm, after all set and done , I cashout $ 21,000 , to be really honest really disappointed, however the house is cash flowing, It is in a desirable neighborhood, close to everything. And It has a 850 sqft detach garage , ready to be convert in a ADU, which it can be rent out for $ 1,000.
How I see business now is : rent is the key, if it doesn't rent right , don't buy it, It will be hard to refinance.By the way banks want to see annual rents, no short time leases or VRBO.
7 Replies
- Lender · Rosenberg, TX · Member since 2022 · 286 posts · 130 votes3y
There is a lot of data not seen and you also have to know the online value calculators for 2023, "AINT HAPPNEING" Lenders are going to look more at 2021 values and max 70% Cash out, that is what I am seeing. There are some that will do 80% but have not had a true 80% cash out in last 2 months.
Maybe I need more volume of clients..... but I can take a look if you want and put it in front of 5 lenders I know are doing COs
Lenders are tightening up, but it understood when we just had a Major and Unsustainable Inflation. Hope this helps without diving into your
- Real Estate Agent · Sarasota, FL · Member since 2018 · 4 posts · 1 vote3y
Hi Eric,
I've got a great contact (Lender) who may be able to help. Him and his team are actually local in Sarasota, but able to lend in every state. Let me know if that would be something of interest. Happy to help!
- 3yAlex BekezaBusiness MemberLender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
@Account Closed Some of our DSCR clients who are having their BRRRRs too DSCR constrained to get the desired leverage are opting for one of two things:
1.) 75% (even 80% in a few markets) cash out IO bridge loan w/ no DSCR requirements (idea is to kick the can down the road 12-24 months and refi when rates come down allowing your deal to debt cover at higher perm debt leverage). Figures rates are in the 9.5%-11% range IO.
2.) 70% cash out in a program with higher rates but which has no DSCR OR DTI requirements (basically hard money on 30 year fixed terms). Right now these can get set up with only a 1 year prepayment penalty so after the 1st 12 months the idea would be to refi at 75% assuming you could debt cover at that leverage at that time with lower rates.
Obviously, there are risks associated with both options but they are both ways to avoid the opportunity cost of leaving too much equity in the deals and settling for low LTV with today's rates. It really depends on your strategy and where you're at in your investment career. Most people opting for one of these options are sacrificing cash flow today in the name of scaling a portfolio much quicker. You should absolutely make sure you have more than adequate reserves to make up for any shortage on debt coverage if entertaining one of these.
Investor Property Loan5306 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
You can take a business line of credit on the equity you have on your property. This is usually done with private money or credit unions.
- Investor · Phoenix, AZ · Member since 2018 · 420 posts · 388 votes3y
Just throwing my two cents in here. If leaving cash in these deals is slowing you down it's probably time to take on equity investors. Give up 50% equity and pull down $100k to move on the better deals. As you go you're going to learn to buy into better price-to-rent ratios so that your DSCR loans still pencil at 70%-80% LTV. But for now, this is a quick way to access your equity without the refi fees.
- Member since 2020 · 2 posts · 1 vote3y
Great information. I appreciate getting several good options to consider.
A couple of follow-up questions/thoughts:
Is the 40% equity left in a deal doing anything for me other than looking good on a balance sheet?
I like the idea of a business line of credit as using the equity if/when needed. Interesting if that going to impact my income-to-debt ratio when I cash-out refinance the next one. Is a business line of credit available if the rental income isn't there?
Once again, thanks for the ideas and this gives me some good starting points to research.
- Member since 2020 · 37 posts · 24 votes3y
Quote from @Account Closed:
Great information. I appreciate getting several good options to consider.
A couple of follow-up questions/thoughts:
Is the 40% equity left in a deal doing anything for me other than looking good on a balance sheet?
I like the idea of a business line of credit as using the equity if/when needed. Interesting if that going to impact my income-to-debt ratio when I cash-out refinance the next one. Is a business line of credit available if the rental income isn't there?
Once again, thanks for the ideas and this gives me some good starting points to research.
Hi Eric
I have all my rentals in Bradenton, next to you. House's prices still high, In a decent neighborhood ARV will be above $400,000, its hard to find the property that property that qualified to the 1.1 % ratio, with the high interest rate and cash flow, without leaving all the cash in, which defeat the BRRRRR.
I just finished out a cashout refi , Bought the house for $270,000 with hard money at 10% in August 2022, b- c neighborhood, Before to bought it , I made sure that it can be rent out for $ 3000 a month. I rehab it with $ 50,000, rent it out in November and started the process to Cashout in November as well, The appraisal came to $ 385,000 , $ 10,000 to $ 15,000 below expected ,but with this market I just went along. My new mortgage is $ 2,400 included ins and tax, 7.99% 7y arm, after all set and done , I cashout $ 21,000 , to be really honest really disappointed, however the house is cash flowing, It is in a desirable neighborhood, close to everything. And It has a 850 sqft detach garage , ready to be convert in a ADU, which it can be rent out for $ 1,000.
How I see business now is : rent is the key, if it doesn't rent right , don't buy it, It will be hard to refinance.By the way banks want to see annual rents, no short time leases or VRBO.
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