All Forum Posts by: Jack BeVier

@Jaston Robinson we've pushed hard to get seasoning requirements down to 3 months from 6-12 months at most local banks. Lenders are just trying to prevent fraud, but they throw out the fast-moving investors with the bath water when they do that. Our DSCR loans are based on the rental income, property taxes and insurance of the property, and you only need to wait 3 months from when you purchased the property to refinance. So we can order the appraisal at month 2 when you're done the rehab and we'll be closed by the time the 3 month seasoning period is up.

@Wendy Black You can definitely refinance it as an investment property, as long as you're not living there. Some lenders have restrictions on condos that have high condo delinquency rates, but that's unlikely the case given the price range you're talking about here. My company does these kinds of loans (DSCR loans, loan size based on the rent, condo fee, insurance and taxes) every day. They're perfect for situations where you own the property in an LLC. 30yr term, rates in the 4s.

It took my partner and I 20 years to build up our rental portfolio to the 750 properties that we own now. We did it through the BRRR method, one house at a time. The trickiest part is cash flow management. Rentals make money in the long term, but not the short term. My back of the envelope number is that it takes $15K in soft costs to add one rental property to your portfolio. So you need to be able to earn that $15K somewhere else. We did it through flipping and wholesaling. Raise some private money to help with your operating capital (I know, easier said than done, but there's tons of posts on BP about raising private money), and keep doing current cash producing deals, so that you can afford to keep adding.

Last thing I'll add, the DSCR loans are the best product possible for landlords growing their rental portfolios. If we'd had access to that kind of lending (and didn't have to deal with stuffy local banks), we'd have gotten to 750 way, way faster. My lending company offers these kinds of loans. Rates are in the 4s. And remember to keep having fun!

75% LTV on the new ARV, correct. After 3 mos seasoning, there's no consideration of LTC.

@Cassie Paul ya I have the same question as Sean. If you buy a house that doesn't need any work and put 20% down, when you refinance shortly thereafter the property will (likely) appraise for about the same amount, so you won't be able to access your 20% down because the loan proceeds won't be any higher. If you find a house that needs some work, you can add value by doing that renovation. That allows you to get most/all of your hard costs back on the refinance, which will allow you to preserve your operating capital and get to 5-10 units faster. 

@Michael Plaks I edited my initial response. Really sorry about creating the confusion here. I had a wire crossed in my brain, consulted my controller and 100% agree with your response. Thanks for setting the record straight. 

Hey Cassie, cash flow management is definitely the hardest part of growing a rental portfolio. You'll need to make sure you've got a way to find (probably off-market) deals where you can do some work, add some value and then refinance off of the appraised value. The 'new' debt service coverage ratio (DSCR) based rental refinance loans were designed exactly for your plan. Seasoning requirements can be as low as 3 months, which is a huge deal when you're trying to grow the rental portfolio quickly. The other great news on that front is that rates are in the 4s for 30-yr fixed, and cash-out refinances to LLCs are totally fine. Hope thats helpful.

We buy about 100 houses each year and over the past 3 years have gone from getting our deals 80% from the foreclosure pipeline to 80% from direct mail. It's a game of persistence and execution. Response rates are low (0.5% call rate would be good), with an appointment rate of 75%+ being good, with an appointment-to-contract conversion rate of 5-10 to 1 being good. Missing phone calls is not an option because they're so expensive to generate, so bare that in mind when you're setting up your systems & processes. All that said, we're still able to get deals at a cost per acquisition of about $5K. That number varies by market, of course. It would be a good idea to back solve from that figure, though. If you want to buy 1 house per month, you're going to need to spend at least $5K per month. Spending more becomes 'easier' in that game, because greater volume allows for specialization and more consistent results. Hope that's helpful. 

Hey Shawn, I think you're referring to how an accountant would book loan origination fees on a balance sheet / income statement according to generally accepted accounting principles (GAAP). Ashish correctly pointed out that the origination fees are tax deductible in the tax year that they are actually paid. I think the confusion lies in that distinction. For GAAP, you'd amortize the loan origination fees over the duration of the loan and recognize the expense pro rata each month of the loan term. When you pay the loan off, you recognize the un-amortized portion of the expense at that point in time. For tax, you write off the origination fee in the tax year that you actually paid it. Hope thats helpful. 

We've got a decent size portfolio in Baltimore, and its up. We were super tempted to sell, and got a great term sheet from an institutional buyer. At the end of the day, we decided not to sell because 1) we're not retiring and selling the platform would inhibit our ability to keep doing what we love, which is finding & buying deals, 2) the tax liability would be brutal and I can't get comfortable exchanging into today's higher priced real estate market, 3) what do we do with the cash? I just don't trust where the stock market is right now and being invested in hard assets in an inflationary environment feels better, and 4) today's super low interest rates allow us to refinance if we want access to some of the equity that we've built up. I'd recommend refinancing with a DSCR loan in the 4s with a 30-yr mortgage and 'locking in the cash flow win' essentially forever. We're carrying some corporate debt in the 8% range and plan to use excess proceeds to pay that down to zero, so our balance sheet cost of capital goes down and we're even more profitable. By the way, what a great problem!!!