All Forum Posts by: Bryan Martinez

Also, something to note, a lot of lenders will tell you that. But if they do not maintain servicing rights on the backend, they cannot guarantee that. Lenders are either selling or securitizing their loans. Sold loans will typically have servicing rights sold with the loan. In those cases, a lot of these services will see a personal name or primary guarantor instead of just the business name and will automatically start reporting to personal credit. I have seen it have a ton of times. Even with securitizing your own loans and maintaining servicing, lenders are always careful to make sure there is a chance it can report. 

Not to take away from anything said before, just adding some extra insight. 

Hey Tom, is the property in the Austin area? If it is, DSCR will not be a option without a very large downpayment. DSCR just doesn't work here. If you are in the same industry as your job, you may be able to get away with 1 year and the previous W2 year. Look at credit unions if you really want to go that route and if it is local to Austin. I got a HELOC on an investment property with capital credit union of TX. That was not standard practice for them, but they made an exception because the deal just made sense. I have been in private lending for a long time, there are things to get your deal funded, but it you want to stick to conventional(I am not as familiar other than with my own experience) I would call some credit unions and see what they can do. If you want to vest under an entity though you may be out of luck going that route. Some lenders hold there paper, some sell it, some do both. That can make a difference on the types of exceptions they can make. Always happy to chat if you have more questions.

$400K is a pretty standard minimum for must lenders in the 5+ multifamily. There are some that will do a minimum $50K per door, so they may be able to get you an exception if they like the deal. Good luck.

Scott Wolf is right Paul. There are a few lenders that will do a long term 30 year fixed DSCR loan for you. It would be above a 7.5% but under 9%. Happy to help as well.

This is an interesting topic. Ben is 100% right, if you are depositing the same amount every month, the lower mortgage rate will win everytime. 

I agree, this for the most part won't make any sense for most people.

However, I think to Brian's point, you are basically using it as a savings account. If you are getting that extra $5K a month, if you pay down you mortgage, you no longer have access to that money without refinancing. So if you want to stay liquid, you may not want to pay down your mortgage that much. If you pay down your HELOC $5K a month extra, you still have access to that money. So this type of setup only works if you are trying pay less interest by having a lower principle but you also want to be able to grab that that cash when you need it asap without having to refi.

That said, you are better off letting your money sit in the stock market. The S&P 500 satistically returns and average of just over 9% yearly. 

All that said, I don't really see a point in doing the Heloc if you already have a mortgage. If you do not have a mortgage and want that line of credit to use when investments pop up, that totally makes sense. 

It all depends on the type of lender you look at. Traditional lenders will have DTI based loans just like when you bought your home. They will give you the lowest rates and fees. Private capital companies offer various investor loans, debt service coverage is one of them. It is basically based on Credit and the cash-flow of the property. They will come at a higher rate because they are riskier loans since they are not verifying your ability to pay them back if you can't get the property leased.

Everyone above is right, game plan your exit strategy from the hard money loan ahead of time. Also, if you are already concerned with credit, be careful about racking up to much credit card debit during the rehab and draging your score down more right before you do the refi. 

@Pete Storseth

Great responses from everyone so far. Alex was right on point with everything he said. There are a lot of lender options out there, traditional lenders(DTI and income based), hard money lenders(short term, high interest rehab loans), private capital(Debt service coverage*DSCR ratio and credit based) and commercial lenders.

Traditional lenders will cap you at 10 properties, however, you may get capped before that because of DTI. A lot of new investors like to start off this way because they have the lowest fee's and rates.

Hard money lenders are one of the few lenders that will help you buy distressed properties and rehab them. There are other options for this but this is one of the quickest options. 

Private Capital lenders can usually do long term financing on rentals. So they are comparable to traditional lenders but easier because they are not income based. They are DSCR based. Since they are DSCR based it is a riskier loan for the lender which is why you have higher rates and fee's with these types of lenders. Typically they don't report to your credit file so they help keep you DTI low.

I would recommend calling several types of lenders and vetting them out. Get a feel for there minimums, max LTVs, seasoning requirements. Seasoning requirements is a big one! If you have a short term high interest loan on a rehab, you want to be able to get out of that right away. The longer you sit in that the more profit you lose. The more you know about what is available the more educated choices you can make about your next property. If the numbers don't work don't be afraid to pass on the deal. 

Hey Kenneth, 

It really depends on your strategy and what kind of turn around time you need. 

Conventional lending(bank or credit union): 

Cons: Will take a little longer to close, probably won't let you vest the property under and entity, will have longer seasoning requirements for refinances(usually 6 months of ownership), will require more paperwork. 

Pros: Lower rates and fees.

Private capital lender(non QM): 

Cons: A little higher rates and fees.

Pros: Much quicker process, some lenders have 30 days seasoning for refinances, you can vest the property under an entity, some are low-doc lenders(less paperwork required). 

If you are rehabbing quickly and don't want to let your money sit there than private capital may be better. If you are ok waiting to get the best possible rate then conventional may be a good way to go. Keep in mind with Fannie/Freddie(bank or credit union) loans you will be capped at 10 properties. You may be capped before then depending on your income level. 

Feel free to message me if you have more questions about this. Hope this helps.

Hey Josh,

It is really going to be up to the appriaser and if they think they can do it. Appraisals are completely subjective. You can get 2 different appraisers to appraise the same property and you will end up getting 2 different values. Some Appraisers will consider using the duplexs as comps and adjust pricing for the 3rd untit. Or like somebody mentioned above, they will use duplexes and 4-plexes and adjust the pricing accordingly. Other appraisers will just decline it. it is also going to depend on how the property is set up. Is it truely a 3 unit property or is it a duplex with a detached garage that was converted into a studio apartment. I would say it is not a dead deal for you, you just need to investigate a little more. 

Hope this helps!