All Forum Posts by: Blake Jenkins

@Nick Cooper

I portfolio lender (if you go the commercial financing route) will be looking for the property to hit at least a 1.20x debt service coverage ratio. As others have said, it is important for you to understand the income potential, vacancy rate, operating expenses, and term/interest rate offered by the bank you are working with in order to calculate this ratio with much accurate- I guarantee then lender will require solid projections as this ratio is very important for getting approved.

Beyond that, a lender will also (most likely) be looking for you to personally guarantee the commercial loan, leading them to look at your financial status as well- including DTI less than 41% and adequate liquidity to cover vacancy periods where the rental isn't generating as much rental income and any unexpected repairs that might come up (example: if you have tenants in a building and the furnace breaks down requiring a $2,000 repair you will need to do that immediately). Make sure you have sufficient cash reserves after the purchase.

@John Teachout

Hi John, I really like your outlook on this.. my gut is telling me what you’re saying I think.. kind of want to start as low risk as possible and get some real experience “under my belt”. Thanks so much for the 2 cents, although I’d refer to it as a lot more than that!

-Blake

@Nick Rutkowski

Thanks Nick! It's good to hear that you went that direction and don't have regrets about not going the SFR direction! That's an indicator to me that multi can be a good choice for a new investor. I just worry about the differences in tenants that might be attracted to a not so nice multi family and if that would come with more headaches, but cash flow is cash flow so maybe it's worth it.

@Nick Rutkowski

Hi Nick, thanks for that advice. What would you personally recommend?

I am seeking some advice on my first investment property.

I have about 55k cash and my budget is about 200K max, (20% down) which will leave me with approximately 15k in reserves. I am wondering if it would be best for me to start small by purchasing a 2BD/1BA home for around 125k and try to rent it out without utilities for around 1300 / month or would you recommend purchasing a 3-4 unit property? I’m afraid that with a Multi family my reserve will be dangerously low at 15k with the additional SQ FT that could cause issues / require repairs.

To be approved for the commercial loan I am looking into I will be a 1.20x DSCR which is possible with both the SFRs and Multis I have been looking at but it's looking like the MFs will cash flow more than the SFR...

I would appreciate any insight possible and please feel free to point out key details I may have not mentioned / may be overlooking

Thank you!!!