All Forum Posts by: Issac San Miguel

Market is anywhere from 10%-13%; if you aren't selling your loans - it can be whatever is legal in your state.

Hard money lenders do not care about income - just that you have enough cash to service the debt for the life of the loan.

This is pretty easy to accomplish with a hard money company - just underwrite your final value after you complete the rehab, and make sure the the income provides a good debt service coverage ratio compared to the monthly mortgage payment.

The lifecycle of this deal would be as follows - acquire property with a fix and and flip loan, which willy typically cover 65%-75% of the purchase price, and 100% of the rehab, and then refinance to a long term rental, DSCR loan.

Hey Syman,

First, the HML is probably spot on with that leverage and rate. 75% LTC, 61% ARV at 11% seems fair.
My guess is you have good credit, 700+ FICO, and are either new completely new to investing or only have buy and holds and no flip experience.

What is throwing me off here is the 6 month minimum - I would also ask if you're paying interest on the entire loan amount from day 1, or if you're paying interest on the balance as the rehab amounts are disbursed. In this climate, you should be able to get interest as disbursed, and not the entire loan amount - this will reduce your carrying cost throughout the life of the project.  

Finally, I would expect leverages to be between 655-70% assuming your credit score stays the same at time of refinance. With an ARV of $500k you should be able to extract $325,000 to $350,000 upon refinancing - that should leave you with approx. $20,000 to $45,000 cash after paying off your loan, depending on leverage.

What you also need to keep in mind is what the property will rent for after you complete the project - which I am assuming is your intention if you plan to refinance out of the property.  The rent amount would need to offset the monthly payment to cash flow.

LTV% is determined by your FICO and how well the property will cash flow. The value of the property will be based off of an appraisal - which 6 months down the road will likely have to be completed again. What are home prices expected to do in this area? Will they go up? Down? Stay the same?

Hi Anna,

As many have said - it sounds like you're looking for a fix and flip loan to refinance into a DSCR loan.

The above applies if you are looking to fund a non owner occupied investment property.

For owner occ, you may want to look into freddie/fannie renovation loans - as those are also an option - although, I have no real information on them, except that they exist.

Non owner occ/investment property funding has changed a bit in the last few months - Money is no longer cheap, and many hard money companies are contemplating whether or not to shut their doors as many of them have been "margin called" by their banking institutions and are having to come up with significant amounts of money to pay down their credit lines.

What does that mean for you, the borrower? Lower leverages, higher rates, and greater scrutiny of your deal during underwriting - be careful when choosing a hard money lender to work with.  

If the rate sounds too good to be true, or is an outlier (I.E. you got 3 quotes in the 10-12% range and 1 at 8%) be skeptical of it, as that company is lending at less than market, and is likely going to balance sheet your loan.  What if that company does not escrow your rehab funds for you, and uses those funds for other purposes? It happens more than you think, a flipper/rehabber completes 20,30,40% of the project with their own working capital, calls in for a rehab draw, and low and behold, those funds are long spent by the loan originator to fund other projects.  

All the above to say - hard money lenders, at least the good ones, are no longer lending out 90%-95% of the entire project anymore - in fact, most of the lenders that truly know what they are doing, and are intending to stay in business are maxing out at 85% of the entire project for their top tier borrowers (750+ FICOs doing 30+ deals a year).

I wish you well in your search for a lender and hope you will reach out with any questions.
 

Hey Ryan!

I am right up the road in Austin.  San Antonio is a great market to flip in as there is no shortage of homes that need to be rehabbed.

Some great people to have in your corner before you get started:

RE Investor Friendly Real Estate Agent

RE Investor Friendly Insurance Agent

RE Investor Friendly Appraiser

RE Investor Friendly Title Company

RE Investor Friendly Lender

The fact that you're in the painting business likely means that you have made good contacts to handle any of the rehab work that a property may require.

Good Luck on your journey!

What you're looking for is a DSCR loan - which is a business purpose (commercial) loan for LTRs and STRs.
Lenders vary widely on leverage and rate, and often times do not offer rate locks, the final rate will the be determined 48ish hours before closing. They of course will give you an idea.

Competitive loans in this space will be up to 80% LTV for Purchase/Rate and Term Refinance and up to 75% for cash out refinance.

These types of loans typically require a full appraisal, but are still "light doc" and come down to how well the property will cashflow after paying debt service, taxes, insurance, and operating expenses.

 Your FICO score will ultimately determine leverage and rate, with 750+ FICOs getting the best terms.

You *should* see rates anywhere from 6.75% to 8.5% depending on transaction type, with 1-2 pts up front.

Hope that helped.

I still see 80% available on SFR purchase/rate and term.

It is a big ask to find a lender that "benefits us both" and build a "long term relationship" when your relationship with the type of lending you're looking for is nil.  I am not knocking you here, just pointing out the fact that when you go to a private/hard money lender currently, you're asking for hundreds of thousands of dollars in a recessionary environment, without any experience.  You're going to have to earn the trust of your lender, and not the other way around - the days of free capital are gone.

If you want to invest institutionally, find a credible lender who is still lending and adapting to today's environment - I have heard that the largest lenders in the space (read, the lenders with the best rates and terms) have paused (read, stopped lending) for the next 60 days until they figure out where the economy is headed.  I am currently working to save deals from falling apart that the largest lender are currently denying/passing on.  The private/hard money lending world is going to look very different 60 days from now.

DSCR is typically up to 75% depending on a few factors.