All Forum Posts by: Kimberly C.

Quote from @Scott E.:

If you are buying a rental property that is turn-key, ready to rent, then you should just use a DSCR loan to buy it.

If you are buying a property that will require a remodel, that is where you might need to buy with a hard money loan. You'll do your remodel and then refinance into a DSCR loan when you're finished.

It makes sense to avoid doing 2 loans if you can. You will be paying closing costs twice if you start with a hard money loan and then refinance into a DSCR.

That was my logic exactly! Why would I want to go through the loan process twice and add more processing fees and closing costs to the situation.

But I’m only looking at fixer-uppers (absolutely no turn key) so this path of HML to DSCR seems like the usual option.

Quote from @Charles Carillo:

@Kimberly C.

Typically with real estate, investors will purchase a property with a short-term loan, perform the renovations/updating, and then sell the property or rent it out and refinance it with a longer-term loan (at better rates and terms). For small properties, a hard money loan is usually used, while with larger properties, investors will utilize a bridge loan. They both have the same purpose; allowing buyers to purchase underperforming properties quickly. These loans sometimes require minimum down payments and might even finance part, or even all, of the renovations. These loans are short-term, with no prepayment penalties. A hard money loan usually has a 12-month term while a bridge loan usually has a term of 2-5 years. These lenders want to be in and out. The investor needs to work quickly to renovate and reposition the property.

After the property is stabilized; investors will sell the property or refinance it with a long-term loan (permanent loan). These lenders usually require the investor to leave 20%-35% of the equity in the property but, the rate will be very favorable and the term might go to; 10, 15, 20, 25, or even 30 years. 

Some lenders will offer both loans. They might convert the HML to a long-term loan. Some construction loans work this way as well.

@Charles Carillo Thank you for outlining this. This clarifies the overall cash flow and advantages of why I'd use this. What lenders would offer both and would convert HML into DSCR loans?

Hello, I'm just starting out and doing research for my first OOS rental property.  I am only familiar with conventional 30 year fixed rate loans as this is what I've used in the past for my primary residence.

I've been looking into DSCR loans and think this would be the best fit for me because I currently have a LLC with 1 rental property. I would like to continue my rental investment property journey and obtain loans under my LLC. My understanding is that DSCR is one option that fits this requirement.

BUT I've been told the better route would be to get a HML then convert it to DSCR after?

1) How does this work?

2) Why would I do this?

3) What is the time frame for this? Do I only have a HML for 4 months or something and then get a DSCR?

I'm confused on the why this is suggested and logistics and time frame.  If someone could break this down with an example of numbers so I can see how this plays out with cash I need to fund, cash I'm borrowing, etc that would really be helpful.

Quote from @AJ Cihla:

Lots of theory and wisdom welcome mats here. Write down your goal, time-box the decision and just do it. I can’t stand the idea of “just take your time” and “it’s not a race” when my only takeaway from the past has been wishing I had done more earlier and started sooner. 

You’ll never be able to emulate your first experience with thinking and note taking. Don’t get me wrong, it’s important to read and ask questions but I have to say I appreciate your energy more than most (apparently). Making ANY decision is the hard part for most people. They oscillate and tire themselves out and ultimately splitting hairs to the point they are exhausted before their journey even begins. 

Do you know what’s almost as bad as a bad investment right now? No investment. Your money is degrading as you hold it and that’s kinda a silly thing to let happen when you’re ready to make a decision. You’ll never have all the data and even the most seasoned investors will be surprised sometimes. Keep asking questions, find local partners, and start writing offers. The quicker you get deeper into the process - the more you will uncover. 

Forget the haters, dive in, and ask silly questions. You’ll build deserved confidence quickly and as long as you stick to non-boom town markets - it’s hard to fail when cash flow is there to support you month to month. 

I actually really appreciate this tough love perspective!

I am a programmer by trade and very goal-oriented and what you are saying is totally real. Too much analysis, not enough action. There is a fine-line between the 2 that experienced people walk.

So right now I’m doing my research and basically asking myself 2 questions.

What can I do RIGHT NOW?
And what is out of my control and has to wait?

The stuff I can do right now I’m doing!

I’ve picked 2 OOS locations.
I’ve connected with 4 real estate agents at those areas.
I’m lining up the network of people and companies I will potentially be working with.

I can start taking actions now (not monetary actions) but actions none the less.

Quote from @Stephen Dispensa:

I would recommend looking at area that show stability, higher returns, and INTEREST you on SOME level. You will need to do some research on the way in and you should invest in an area where the opportunity excites you on some level. If you're charmed by college towns in the North East, consider investing there. If you like the idea of Florida sunshine and endless summer, consider investing there (and call me if you do!) 

I’m taking THIS to heart! Going OOS has a lot of possibilities. So far I am actively researching EVERYONE’S OOS suggestions and my first filter is literally to just look up the city/town on TripAdvisor and see if it’s a place I would like to visit.

It’s actually a great filter and there are already some winners standing out!

I haven’t traveled much in the US and these suggestions are definitely opening up my eyes to cities I’ve maybe heard of but never actively looked at.

Thank You Everyone!

Wow, I woke up to so much good information on my current situation.

Thank you everyone! If I don’t quote you directly in a response just know I have read EVERYONE’S suggestions and information here. 

You should see me…literally writing notes on a scratch pad of areas, ideas, and research that still needs to be done on my end.

I have started researching OOS areas to invest in. It’s currently the bulk of my research since the numbers just make sense with that strategy and my funds. But I’m definitely going to look into these other options I didn’t even know existed! That’s probably todays project hehe

@Joe Villeneuve I am learning.  And now I understand that all you experienced people have probably seen way too many people like me...so inexperienced but with cash in hand that we just jump in and make BIG mistakes.

I understand now, that THAT is what all you experienced people are trying to help me see and understand.

Thank You

Quote from @Harrison Chow:

Hey Harry! Glad to hear you are also considering the Midwest. As a resident and investor in Columbus OH, I can attest to the fact that investing in the suburbs here is a wise choice. In addition to still offering 1% deals, Columbus is also an expanding city that is attracting several major companies in the next few months/years. Generally, if you are looking for overall appreciation and satisfactory net rents, you are better off in Columbus. However, if you prioritize generating a substantial cash-flow, then Cleveland would be a preferable option. Choosing the right neighborhood is key though, I can provide you with a general overview. Hope this helps and if you're interested in exploring this market further, let's connect and discuss how I can assist you!

Curious about the 2 locations you listed (Columbus vs Cleveland)

For Columbus, would this be more single family homes (with the goal of buying several of these for steady long term rental income)? Also would these investments require a lot of rehab in order to secure positive cash-flow?  Meaning a lot of management/securing of contractors and overseeing upgrades.

For Cleveland, would this be more duplexes or multifamily homes (with the goal of buying one of these and potentially adding additional bedrooms for more rental income to secure, as you stated, substantial cash-flow)?

If investing from OOS, which option would be the easiest to manage
starting out? Especially if just trying to build a network of team
members to be the boots on the ground (since I cannot be there).

@Sam Yin I really REALLY appreciate your response.  How you explained everything actually makes ALL the previous responses make more sense now.

I honestly didn't understand what the previous comments were trying to say.  I thought I did, thus my responses to them.  But the information that they were trying to relay to me was lost.  I'm not experienced, I do not understand what they meant in a rapid-fire-one-paragraph response.  This is why I'm here.  Because I am lost.

Again, your breakdown and explanation helped a lot.  Thank you Sam for the examples of potential situations that could happen long-term in SoCal.  It's information like that that will stay with me so I can start building a foundation of knowledge in the real estate market.

@Harry Dhaliwal I'm in a similar boat.  Live in CA with $190K to invest (so a bit more but in CA terms it's just as limiting unfortunately) so I'm debating to stay or go OOS.  Did you end up narrowing down an OOS market?

There are a lot of good suggestions in this thread on OOS markets so I think I'll crunch some numbers and see what $190K could get me elsewhere.