All Forum Posts by: Carrie Matuga

@Marquez Davis You can expect a lot lower leverage with land purchase, but as @Sasha Mohammed said, there are products for ground up construction that roll the costs (horizontal and vertical) into the overall construction budget. If this is you are going this way and this is your first project you can expect that your options will be smaller if you are not partnering with someone who has successful ground up construction exits either as a GC or an investor. Don't be discouraged if you run into this, it CAN be done on your own with a few lenders - you will need to have your GC vetted and approved to verify that they have the right experience. If, however, you have extensive flipping experience, that can count as experience for some lenders. 

@Venkata Soma Once your property is completed and ideally rented out, you can look into refinancing with a conventional loan if it's been a year or DSCR loan if it's been under a year. DSCR loans are typically best with 6 months seasoning, but there are options for 2 options for 3 months or even no seasoning: 1) to where you can get your costs out (purchase + renovation) as long as that number is at or under 75%, but if any other forced appreciation has happened you are limited to the max of your costs in or 75% of market (which ever is lower) OR 2) no seasoning DSCR loans which candidly come with pretty high points that make them MUCH less appealing.

@Sam Deb It can be done for sure, but I you have to factor in renovations taking longer than 3 months )especially in hot markets where good contractors are hard to find and might not be ready to start as soon as you are closed), a 6 month seasoning requirement for some lenders and 12 months for conventional, that you may or may not get ALL your cash out (doesn't make it a bad deal), the bandwidth to run multiple projects at the same time.... 

@Rafal Soltysek I love that TX an TN are in the path of massive population growth and migration. AR is also seeing a lot of appreciation! I think if it were me, I'd narrow to 2-3 metro areas vs. and spend time analyzing deals in each for a month to see how the numbers look for your model.

@Pari Z. Welcome to BP! Powerful first steps 1) goal setting 2) downpayment savings 3) analyzing in-state vs. OOS investing!

@Neal Rosenshein that might be a challenge. It will be helpful if your residential is 50%+ and commercial is less than 50% and if your loan is over 100K. Good luck! 

@Laura Lewis A property qualifies for a DSCR loan vs. you and your DTI or W-2 income. DSCR is calculated by rent/PITI (payment + interest + taxes + insurance). Ideally your ratio is over 1, and ideally above 1.15. You need 20-25% down and interest rates typically run about 0.75%-1.15% above conventional loans. They are relatively low doc loans, so you 'd need LLC docs (if doing it via an LLC - which is not required but gives you more options), bank statements, proof of insurance and copies of your ID... and usually that is it.

@Sara Habtom it really depends on what kind of investments you are doing. If you are buying a turn-key property that is rent ready or already rented, then a DSCR loan could be a perfect option for you. With this type of loan, the property revenue qualifies you for the purchase vs. your DTI or work history. DSCR = rent/PITI and you want that number above 1, and ideally above 1.15. If the property needs work, then a bridge option is something to look into. These are temporary loans (usually 1 year) that are interest only and they often fund the purchase and renovation. Once the property is renovated, then your exit is either a sale or a refinance. During a refinance, you can get up to 80% of new value and cash out the remainder.

There are companies that typically specialize in DSCR products and other Hard Money bridge options that are dipping their toes into ground up construction funding. DSCR loans by nature require that there is no deferred maintenance and no construction needed. You qualify for the loan by the rent revenue the property brings in and there is no revenue coming in from a product that is under renovation or being built... To do ground up construction, you need a bridge that can either be construction only or cover both horizontal and vertical construction. They are interest only and typically run for a term of 12 months. Experience not necessarily required but a lot more options if you have completed exits.

@Irfan Saeed I'd suggest you look into a DSCR loan. They work for both long term and short term options! As long as your purchase was over 6 months ago, you can go up to 80% if shorter than 6 months, it's typically closer to 75%. You'd qualify for this loan by your credit score (660 min but best terms above 720) and the DSCR ratio (your rental income/PITI).