All Forum Posts by: Carlyle Gianni

If you are newer turnkey might be an easier option, but watch out how the rehab was done. If you ended up in a property that has low grade materials, you can replace stuff more frequently than expected meaning higher costs than if you had done it yourself. It may be easier to finance a turn key because a lender knows the income it is producing, so look at DSCR loans in that case.

Depending on when you need the cash, it might be better to wait until there is a paying tenant in the property. You will have more lending products available to you with a paying stable tenant, such as a DSCR loan. That gives you the most options, and potentially the higher LTV. Another thing to consider is possibly recording a lien on the property from an LLC (yours) and you as an individual are the borrower.Then you are looking at a rate and term refinance (higher ltv) versus a cash out refinance, but you would have to ask the lender if they allowed arm length transactions like this.

Are you able to refinance them as a group to get a larger loan amount? Something like a portfolio loan from a local credit union?

 I can second reading their book. I've met with one of the authors and they were really super helpful. I have some experience in lending, but the book still gave me a lot of really good information. My next loan funds this friday, with changes I learned in the book. Really a good starting point.

 Thank you for the clarification I think this is why I'm seeing such a variety of interpretations for rental imcome.

Hi BP Family - I'm trying to get clarification on something as I seem to get conflicting information from different lenders. How is rental income calculated for your DTI? I had one lender say they took 70% of the rental income from the last two years (as an average of 2 years), and someone else say they only look at the income on the tax return for the rentals (which is negative because of the bonus depreciation we took). Is there a standard way of calculating income for long term rentals?

 That was exactly what I thought about when making the decision to leave. I had to take a long hard look at our family budget, what expenses would increase after leaving W2 (health insurance was a huge factor in my case), and what were we hoping to gain as a family from me leaving. Once we established a number, it then became a game to figure out how to get that number coming in every month and save it, as we were able to live off W2 income well already. That's how I found private lending because I wanted pure cashflow, not a million rentals to deal with. So we turned to lending to allow us freedom to travel and have cash flow without the overhead of a mortgage. When we looked at what we would want as an emergency fund for ourselves and then separate funds for each property we held as a rental, the numbers were so large that it didn't make sense to even try because it would be years. Instead with lending, it was a matter of how much capital did I need to get my hands on to lend out in order to generate the income.  For example, we needed about $750k at 12% annual to cover basic living costs. We obviously didn't have $750k at the beginning, so then it started the conversation of leverage. If I had access to $1.5M at 6%, and then I lend it out at 12%, that also gets me to my goal on a monthly basis. Then the conversation is how do I get ahold of $1.5M. It gave me a target I didn't have before, and something that seemed doable.

I did a few fix and flips in early 2020, and you are right there has been a change in the market. The turning point for me to make the jump out of my career was hitting a certain bench mark of cash flow. I turned the capital I got from the flips into private loans, and I now use that as income to replace my W2 income. I am not semi-retired. I work as a consultant on projects I genuinely enjoy and continue to learn more about private lending. MAybe a better analysis would be not so much how long could you live with the cash you have now, but what level of cash flow would make you feel better about cutting the apron strings?

 @Andrew C. I second what Alex said above. I've talked to her before and she's very knowledgeable about private lending and the fund options out there. Really do some research and read those documents! She wasn't kidding about all the pages of legal crap, but she's always come back to me with answers to questions or connections to resources to help me.  I personally want to invest with her when I feel I understand this option a bit better.  From a passive investor standpoint, I like the idea of a fund because I don't want to review loan files. She did talk to me about brokering, but honestly I don't have the headspace right now for that with 3 small girls at home. I just wanted cash flow!