All Forum Posts by: Brandon Beardt

Quote from @Colleen Murphy:

We are working with a lender to get a cash-out financing loan on an investment property that own. But, we were just denied for the loan with the loan officer saying she was, "unable to get the refinance approved through compliance. Because of the high rates and the high cost of the rate, I am unable to pass compliance…I tried to restructure, but because of the loan amount, I have no wiggle room."

She explained that the closing costs combined with the discount rate would exceed Freddie Mac/Fannie Mae caps. We are hoping for a loan of around $150k but were told that the closing/rates total could not exceed $3,445 (but were quoted a total cost of $8,194). Anyone else running into this with rates so high? It seems like we will not be able to get a loan for this property at all given this information. We've never run into this previously but, of course, rates have never been this high during the time that we've been investing. 

Hi Colleen,
Sorry to hear that you're having trouble with this. Based on your post, it seems like you're unable to qualify because total closing costs are over the allowed threshold for this type of loan. Is it safe to assume you are buying down the rate to help qualify with DTI as well? If so, the only options I see you potentially doing is either decreasing the loan amount entirely or paying off some additional debt at closing using the cash-out proceeds, if you have any. Paying off some/any additional debt (like credit cards) could possibly help lower your DTI to a more suitable level to qualify. If you ABSOLUTELY need the cash-out, another alternative would be to check out alternative financing programs that don't take your DTI into account. Rates will be higher of course but at least you'd be able to get the cash out you need. Best of luck!

Quote from @Robert Malcolm:

First time investor here, I have a deal that I really like. I am looking for a DSCR lender who can provide a competitive, I have a term sheet but want to see if there is anyone who can close quickly also.

 Hi Robert,

Congrats on finding a deal you like! Generally, broker's have access to more competitive rates than going lender direct. If you're already working with a broker, chances are your rate is pretty competitive. If not, it will be worth your while to check some out. Whoever you contact, make sure you read their reviews and do your due diligence when gauging them. Rates are one thing but service and communication are another, and should definitely be taken into account. Best of luck to you!

Quote from @Kevin L Owens:

Hi everyone,

I am new to investment properties and am trying to understand how to get financing from a lender for a property I want in an LLC. My first foray into lending was an inquiry with a lender who indicated they would not make a mortgage in the property was tilted and deeded into an LLC, it has to be in my name. If I bought an investment property and had it in my name then moved it into an LLC the lender would call the loan. I prefer some anonymity as I am a law enforcement officer. I want to shield my self, family and career from elements of real estate investing. Any understanding or guidance would be appreciated. Thank you,

Kevin

 Hi Kevin,

The fact that the lender is requiring you to close the loan in your personal name makes me believe you were trying to get financing from a conventional lender - is that true? Often times, you can request that the property be moved into your LLC by simply calling the lender and asking if they'll allow it. It's at their discretion whether or not they will, but always worth a shot. Worst case they say no. If you're looking for even more separation/protection between you and the property - you may find alternative financing more suited towards your needs (business purpose loans). This type of financing will allow you to close in your LLC and better yet, since it's "business purpose", it won't report on your credit. I've worked with many investor clients who prefer this type of financing simply because of this fact (along with the loan process being easier overall). This type of financing often comes with higher costs/pricing than conventional programs, but if you're looking for that extra layer of anonymity AND protection (which it seems like you are), this may be a route you should explore more deeply. Best of luck to you!

Quote from @Adam Graziano:

Hi everyone,

i am looking to get into the STR market by purchasing my first property in Virginia this winter.

On the finance side, I assume I will need to start an LLC. How will that effect the purchasing process? My down payment is ready, what are the steps I need to take prior to purchasing my first property to make sure I am protecting myself while not leaving any money on the table.

I am new to this, all incites and advice are welcomed and appreciated.

 Hi Adam,

Congrats on taking the first steps! I would say make sure your credit is at a good place. Having good credit creates so many more opportunities for you as you're seen as a less risky borrower to lenders. Overall, you'll be getting better rates and better terms when financing if you have good credit. Next, I would say is down payment - but it seems you have this covered. Don't forget to include closing costs and make sure you set some capital aside for reserves in case anything pops up. With regards to creating a LLC, it's not required but you can start one if you'd like. Where you file the LLC will be important - will it be in the same state you're doing business in (purchasing/operating investment properties) or in another state? Since you're getting into STR's, make sure your numbers are accurate. Look at comps in the surrounding area and be conservative! Also be aware of what specific guidelines different lenders have regarding STR financing. It's different than LTRs and could have higher pricing. You're on the right track by asking questions in the BP forums. Best of luck!

Quote from @Jonathan Rabot:

Hi BP Community,

1st time home buyer currently in escrow.
5 days ago lender suggested to lock rate at 5.99%, which we agreed to lock it in at that rate.

Received a notice today that rate was unable to be locked due to fluctuations in market. Now rate is higher and about 2.5 more weeks till escrow closes.

Looking to see if this has happened or can occur and options we have moving forward.

Appreciate your thoughts.

 Hi Jonathan,

Congrats on your first home! 5 days ago from yesterday would have been Friday. What time during the day did you try and lock the rate? I ask because maybe it was just before closing and the rate wasn't actually "locked" until the next Monday perhaps after rate increases went into affect? Either way, I'm surprised you just found this out yesterday. It sucks but it may be one of those "it is what it is" situations. I don't know if you're working with a broker or went lender direct, but usually the originator gets a lock confirmation indicating when the lock was put through. In past situations, if there are any technical difficulties when trying to lock a rate, I would screen shot the lock page as proof of actually trying to lock at a specific date/time. That way I have some leg to stand on when trying to explain my case. Sometimes the lender can honor it, sometimes not. It's at their discretion unfortunately. 

Quote from @Skyler Shively:

Looking to scale my rental portfolio. I have been in the search of lenders with low or no minimums for purchase/ refi. Have found that most DSCR lenders have 75k-100k minimum loan amounts. I live in a cheaper market with a lot of sub-75k properties. Current lender have no minimums but the fees are high and they want 30% down. Looking to possibly connect with a new lender and discuss my options. Thanks!

 Hi Skyler,

Your scenario is not uncommon. Any properties with a values sub $100K are somewhat hard to find financing for. Usually because they're in a rural area and there is lower upside for the lender when they package and sell the loans. I have seen lenders go down to a $50K loan min, but like you said, at an increased cost. I personally have not seen any lenders go lower than that. Best of luck!

Quote from @Austin Watt:

Hello All!

I’m working on my first deal on a 5 unit property that the owner is willing to finance. My father and I are partnering on the property and he is going to provide the down payment. I’m working on setting up a virtual tour, but the wholesaler is wanting proof of funds for the down payment prior to doing the virtual inspection as he has to have a family member in the area help with the inspection. 

I’m fine with providing the proof of funds but I’m just not sure what kind of document needs to be provided.

Thank you all!!

 Hi Austin, 

Congrats on finding your first deal! If the wholesaler simply wants proof of funds for down payment from your father, you can simply send them your father's most recent asset statement showing the funds. Just make sure any account number and any other sensitive information is redacted. As long as it shows his name and the balance, I would imagine that would suffice. It's possible the wholesaler will ask for 2 months but that's up to them I suppose. Congrats again and best of luck!

Quote from @Christian Timiraos:

I'm have trouble finding a leader to finance me for properties under 100k for long term rentals

Any Recommendation?

 Hi Christian,

This problem is quite common as many lenders require property values to be at least $100K and in a non-rural area. With such a low loan amount ($75K min), lenders make very little when packaging them up and selling them. However, I have seen some lenders offer minimum loan amounts down to $50K, but pricing becomes more expensive to offset their risk. Keep in mind that since the loan amount is smaller, points/fees will seem much bigger in scale (5+ points if not more), but that's just the name of the game. What are some details regarding the scenario you're trying to do? Location, estimated property value, monthly rent, etc. That'll help other respondents understand and provide feedback as well. Best of luck! 

Quote from @Thaddeus Bielecki:

What should I be looking for when finding a property house hack? Are there certain key features to keep my eye out for besides making the numbers work?

 Hi Thaddeus,

It kind of depends on your comfort level and goal for house hacking. Are you trying to live in an SFR and rent out individual rooms? Are you comfortable with having roommates in this case? If so, bedroom and bathroom count is something to consider. Or are you trying to live in a multi-plex (2-4 unit) where you and each tenant can have their own private space? Local area is also important. Depending on where the property is located, you'll be getting tenants/roommates based around that area. If the property is in more desirable neighborhood, you may get more options in terms of tenants and higher rents than a less desirable neighborhood. Plus, you'll be living there too, so these types of details matter!

Quote from @Laurie Austin:

I have a condo in a high appreciating area of Texas that cash flows $100 a month and used to be my primary residence-great loan at 3% on it and about 75K in equity.

I want to buy a home in another state on a lake to STR. My thought was to use conventional financing as my primary residence to get this new property however my income does not qualify me for the amount I need as they are only counting 75% of the income from the condo rental and I'm self employed which means my Adjusted gross ends up being low. Basically I need a much bigger downpayment or adjust my purchase price to buy conventional and keep the condo.

I want to keep the condo but see these as my only options-am I missing anything creative I could do? 

1. DSCR loan on the new lake house property but rates are ridiculously high which cuts in the margins substantially.

2.   Sell the condo take the equity and purchase 1 or 2 properties in the new area.   (least attractive to me)

3. Getting a HELOC is not attractive as the pmt on the condo plus the HELOC pmt would be similar to just doing the DSCR loan... and increases my DTI ratio...

What am I missing-help me get creative here to be able to keep the old property and buy the new.   

Thanks-Laurie

Hi Laurie,

One creative option you can try exploring is trying to find any sort of seller financing deal for this lake property. Of course, that's easier said than done, but that's just one option that popped into my mind when reading your post. It sounds like your main goal is to keep the condo while being able to purchase another property, & if that's the case, keep the condo then. If doing so means your DTI will be out of line when trying purchasing more property, you will have to get non-conventional alternative financing to help purchase more property. From reading your post, it seems you don't want to increase your DTI at all, which is where these alternative programs come in, such as the DSCR you mentioned. DTI isn't even considered with this type of financing. Like you said though, you'll more than likely have to come up with a higher down payment, and the rate will be higher, but that's the trade off.