All Forum Posts by: Jonathan Taylor

@Robert Dunbar conventional and cash are the opposite sides of the purchase option spectrum. The middle options for lending are business purpose or DSCR based lending. These loans dont ask for the amount of documentation that conventional lending does and are more efficient in closing times. Its another tool to have at your disposal for lending.

Post any more questions that come up.

@Robert Dunbar A property 5 units and above is considered commercial and has financing that is structured differently than 1-4 unit loans BUT there are government backed loans for commercial properties. These loans are backed purchased by the US government but require experience in the 5+ space, stabilized properties with a history of stabilization along with a slew of other requirements. 

I have refinanced my clients into these loans after any value add stages are complete along with a stabilization period. That MAY have been what the broker is referring to but unless the broker is a licensed loan professional, I wouldn't put too much weight in their advice. 

You can purchase a 5+ unit with a DSCR loan or rehab loan, very similar to 1-4 loans.

What other questions do you have?

@Carrie McPeek a lot of lenders are restructuring or closing altogether in this market. Glad you were able to find this out before you had any money on the line. 

@Amanda Grace Pozo you can search lender reviews in the lending sections of this site. Do your research as there are many lenders out there and the experience of BP can help you narrow down the best options for you.

@M. Michele Hamer If the property is free and clear and you need barely 15% of the value (1.7m/250k = 15% LTV), bridge lenders would be a smart option. These lenders use the as-is value of the property for a short term, 12-24 months, and the cash out proceeds to cover loan costs. If you plan on keeping the property, you can refinance into a low leverage 30 year fixed DSCR loan to repay the bridge loan.

If you plan to sell the property, then the sale will repay the bridge loan. This is easy to do since your leverage is so low. 

@Will F. I read the proposal and the opposition document you posted. Words fail me to understand what kind of leadership would think this is a good idea. They are demanding that we allow tenants to violate lease agreements (allowing unauthorized people/pets to live in the property) and how rent payments to be applied. 

I vehemently oppose this. I can barely keep track of the RSO and HCIDLA restrictions now the Board of Supervisors is demanding this of us. No. 

@Erin T. That sounds like it would if there is a registered history of C of O, but @Eddie Torres brought up an option. Getting second, third and fourth opinions can help here since it sounds like this request is throwing all of us for a loop.

@Taylor Wisnewski HELOC on your primary is a good idea but your lack on W-2 will halt that process as those are underwritten the same way as conventional mortgage.

DSCR or bank statement loans would provide you with cash to work with. These use the property's income to qualify for the loan while your FICO and experience along with LTV are factors as well.

DM with questions but you are in a good position.

@Aram Ozen I converted an ADU in LA and this is an issue on the smaller loan amounts.

Here is my two cents. First, you do not have enough equity in your Primary for a HELOC. lines of credit (depending on the bank) go 70-75 CLTV and you are right at 75 LTV.

Second, the loan amount is so small, a lot of lenders will pass, especially in SoCal.

Third, ADUs usually do not add the value you would think. These builds are cash in cash out play and rarely increase the property value enough to justify a construction loan.

Id explore options with zero APR credit cards if private financing is unattainable. I know credit card debt is scary, but well managed and calculated, its strong tool. I paid for labor in the cash I had and fixtures/supplies on credit cards where I knew exactly when the payoffs were and when they came close, opened another card and did a balance transfer. Then the cash flow on the ADU paid down the remaining balance.

@Christian Hanus 

I second @Dave Skow. A well worded LOE can solve this issue. Moving houses and neighborhoods isn't a reason to deny a loan unless you cant afford the new one due to DTI.