All Forum Posts by: Daniel Molina

@Coty Dolan Lenders are still actively lending in this space. You are already aware of the biggest adjustments, leverage and rate. I think the biggest thing to realize is that everyone is feeling this pressure not just investors and their lenders, but so are the sellers. I have seen contracts get renegotiated due to the adjustment where everyone is satisfied and can accommodate. 

@Corey Law I actually believe that this is the ideal scenario to use a hard money lender. You will have more flexibility with regards to loan type (acquistion only, term, including rehab financing, etc) and you will close much quicker than a conventional lender. In my opinion this give you a huge advantage over other buyers since you can give a much shorter timeline for diligence; close in 7 days, which sellers would love to hear due to the current pandemic. 

The flip side to this will be your cash required. Almost all HML will require -25-30% down and rate will be higher than what you can get at any conventional lender. It is important to keep in mind that like any other interest on a mortgage this can be tax deductible (speak to a tax professional) and if you create an LLC usually a non-recourse loan (varies by lender). By using these techniques you can create additional ancillary benefits by using a HML.

Lastly, I agree with @Whitney Hutten 100%. This is all determined by your ability to refi out and how quickly you can do that. Most conventional lenders will require a certain amount of seasoning before cashing you out and you should be well versed in what is needed to qualify. For example, if you are a 1099 employee with shaky credit a QM loan may be hard to get for an investment property. While specialized lenders exist to exit quickly, the uncertainty of the commercial market make that loan a bit of a moving target. 

In short, if you have cash and are in a good financial position I think you should take full advantage of the market. If you a bit more conservative and not confident in your ability to qualify for a loan, you may want to pass on the opportunity. Feel free to reach out if you have any other questions; just my $0.02 on the current state of REI market.

@Byron Beckford like most comments say, your best bet is a commercial or institutional private lender. Typically only looking at a DSCR (debt service coverage ratio). You could go to a small local bank willing to balance sheet the deal but you'll pay a premium and usually full recourse.

Feel free to PM me for more info, but seems very doable.

@Ryan Steiner I agree with a lot of the feedback you have been receiving. I would add that you should focus on the close time frame and if the seller is accustomed to dealing with investors. Typically anyone who is used to closing with investors understands that there will be some sort of financing involved but it will not adjust the ideal closing date.  In my experience, here is how I would answer your questions:

1. Does a portfolio lender preapproval letter count as cash when searching leads? Not unless you can close in the same time frame as a true cash buyer. 

2. When searching leads, what keywords tell you they'll accept portfolio lending? (if PL doesn't =cash) Financing available, close in 10 days. Look at how long it has been offered for sales or DOM if it is MLS listed. the longer it has been on the market the more likely you can negotiate a financing contingency

3. Depending on answers 1&2, is hard money lending usually the foot in the door for beginners low(er) on cash? Yes, Tampa has been getting pretty affordable lately. I see a 9-11% rate and 2-3 points very regularly. 12 months with no prepay. 

4. Do I need to ask for a preapproval letter each time I want to make an offer, or can I use one to submit for multiple leads to save time? Only ask for a new one if they are property specific. 

@Clint G. In my opinion you should not let your inexperience deter you from using lenders. There are a lot of options out there for people in your position and lending institutions that would work with you to structure something even if you are a first time investor. Feel free to do some research on BP or message me with any questions.

@Christine Edwards, I agree with @Kristian Conway and use a private or hard money lender. I would caution you to make sure that you do not live in the property since that would typically knock out this option. 

Living in the property will then mean it is a residential loan not a business purpose and you would then be subject to conventional financing or some creative Non-QM shops. I do not know many options about those avenues since I only do private money lending. 

Lenders are now changing their programs to allow cash out and even long term debt pending the debt service coverage ratio (DSCR) of the property.

Hi @Aimee Tarte you have some great questions and I will also answer to the best of my ability and experience. Full disclosure I am a private lender as well. 

1. I would search forums or PM people to get who the recommend. There are also some adverts of lenders in the MarketPlace

2. Every HML will have their own guidelines. I pull to check background, FICO, previous foreclosure/BKs. We will only make a hard pull every 12 months. Again this is based on every lenders own set of guidelines

3. We look at reserves for cash to close not really a "ATR" rule 

4. I would have an AMC (appraisal management company) complete a valuation for me. This would be the value we use to leverage the property.

5. You can absolutely go directly to a lender; however, if you signed a broker fee agreement you are usually stuck paying it regardless of who does the work. 

Feel free to reach out to me for further questions, but your best luck is just calling around to other lenders and finding one that best suits you. I am a firm believer that people do business with people they like and trust which is why I always suggest a call. 

@Chad Dickenson I have seen cash out down with private/HMLs but it will be purely determined by your debt service. If you can show work has been done on the asset you can order an appraisal and go off of that value. I typically see these as an ARM product with rates in the mid 6's. I have done a few of these already mainly in the southeast.

@Charisse Patterson I agree with a lot of the feedback you received but my biggest emphasis would be around lenders. Like @Tamara Deering said, understanding where you get your money and what type of financing is huge. Most conventional won't allow you to close in an LLC; forcing you to go hard money, PML, non-qm, etc. When exploring that world everyone has their own set of guidelines so it is important to talk to a lot or possibly work with a broker. In my case, using an LLC will allow me to offer you non-recourse and better pricing. This isn't true for all lenders.

Just note that if you work with a broker you will be paying some additional fee/points for them to find the best deal for you. 

Good Luck and feel PM me with any questions.