All Forum Posts by: AJ Exner

Hey Kiersten,

Are you working in and around Minneapolis? I have some clients working up there and I have heard about some of the difficulties. Without knowing too much about the offers that you've put in, my guess is that you are facing a VERY competitive market, competing with some seasoned folks doing alot of flips and buying cash above asking with no appraisals. 

Have you looked into other markets at all? It is certainly doable, just going to be a bit of a fight to get that first property going. 

Hey Amy,

It is very doable, I have a few clients doing that in various parts of the country. The biggest thing to take into consideration is the underwriting requirements of the rental income on the refinance. 

The lenders that I know that are doing this right now are requiring about 6 months of seasoning on the front end before they refinance it. They also might want to see some experience managing a STR, as well as a good credit history and a good asset. 

Getting some ducks in a row on the back end is really important before doing a BRRR on a potential STR because of the variables involved.

 Dushyanth,

Seasoning-wise, it does sound like a DSCR would be the right call, especially at 6 months. There are even a few out there (especially showing the work that you have done) that will do a 30 year fixed with less than 6 months of seasoning. But it sounds like you are in good shape.

If you are dead set on doing a conventional loan, you could also look into a stabilized bridge loan with your, or a different hard money lender. With cash out options and no prepayment penalties, it could get you the liquidity you need while still providing the flexibility to refinance at 12 months once that time comes with your conventional lender of choice.

There would be points involved in that transaction, but if you anticipate the market to be better in 6 months from now, it is something else to consider.

Ha, more often then I care to admit. I work with a number of clients who use them and its especially fun when you get to come back with an 'I told you so'. 

I will say though, I have been very satisfied with Backflip and their programs overall. The good news is that whenever you can show experience and knowledge in the area, it really helps you with leverage with them in future deals

Hey TJ,

I use Backflip quite a bit, and I know that it really is more of a 'guiding light' as much as anything. I think combining that, with some common sense, and giving a buffer is a great way to go. 

Especially given that they will do 75% ARV on rehab loans as long as the property minimum and total loan amount minimums are hit. Sadly it will be as much an estimate as anything until they do their appraisal.

Hey Dave,

Building a team is essential to building a portfolio and creating generational wealth, and fortunately there are a lot of great teammates on here willing and able to help you get to where you are hoping to go!

Arti,

Things are looking a little better this week, but with 25% down I'm still seeing around 8% in the Hard Money space. With a buy down in the right area you might be able to get it below that.

 Hey Brian,

Absolutely, there are a TON of people doing this right now as it gives you the ability to still employ a BRRRR-strategy with low cost housing stock, get it rent ready without "too much" rehab (comparatively speaking), and get a stabilized income to rent out in that area.

Highly recommend a PM that is aware of the ups and downs though. The potential for cash flow is certainly there, so you just don't want to get caught up with a bad few. Let the professionals handle that.

The thing to certainly be aware of is, when you are financing, be aware of property price minimums that many lenders might have. If you are working in that space, you might run into loan/property minimums that could slow you down. Make sure that any lender that you might use is aware of your strategy and isn't surprised when you find a good property for less than $50k. 

Hey Sheri,

My clients who are doing this have either had them for a while and have a lower interest rate, or put a little more cash in to reduce the leverage and help keep it cash flowing. 

It is certainly doable to have a STR that cash flows in this market, but the monthly HOA can REALLY carve into the DSCR and keep it from being what it could be. I have also seen some horror stories on rehab being done, or needing to be done, and HOAs giving some trouble there. Familiarizing yourself with the HOA itself would be really helpful before diving in.

I've seen some folks even secure the property with a non-DSCR stabilized bridge loan, where cash flow isn't as big of an issue on the Underwriting while they wait for rates to (hopefully) drop a bit and maybe make it a bit more palatable.

Hey Becca,

Have you looked into Additional Dwelling Units out there? A few of my clients, and even colleagues that I met at BPCon this year who focus in CA are leveraging ADUs to optimize cash flow and grow their equity position out there. 

I will caveat that the ones that I know focus in So Cal, so I'm not sure of the intricacies of the Bay, but I would suspect similar issues.