All Forum Posts by: Mark Munson

Hi @Rogelio Andres Jimenez

If you go the DSCR route, your rate will be somewhere between 7%-8.5% at a 75% LTV. Likely on the higher end of the range, unless you do a buy down (buy down costs can be rolled into the loan with some programs). If you are intending to keep it for the long-term, then I would be less so concerned with the rate and focus more so on a prepayment penalty no longer than 3-years. You can refinance after the 3rd year when rates may have come down. If you can qualify for a more conventional loan, then your rate may be slightly lower. Lastly, you can look at bank statement loans that have no prepayment penalty and better rates than a DSCR loan. Feel free to reach out if you need advice, best of luck!

Try InvestorLift, you'll find lots on there awith contact info. 

Quote from @Nathan K.:

Hopefully you guys can help answer this for me......I live in West Virginia and primarily invest outside the state.  I like investing near big cities, Indianapolis, Atlanta, etc.  Here's my problem, I've invested pretty much all of the cash that I have and have hit a plateau.  So my question is this, how do I find seller financed deals?  The few people I've talked to don't really have good opinions on it.  Is there a website with just seller-financed listings that I'm not aware of?  Thanks. 

There are a few routes to try. Some people are targeting FSBOs and pitching seller-financing to them. Most others find seller-financed deals through pulling data on property owners in the areas they want to buy that have a lot of equity in their homes. You can target lists through a multiple list source sites, skip trace those lists, then market to those buyers through cold calling, SMS campaigns, direct mailers, and/or door knocking; amongst other routes. There is no single website to easily find them (that I'm aware of) and if there was, I'd imagine you'd be competing with 1000s of other investors. 

Hi @Dan N.

DSCR loans don't lend you rehab money whatsoever and the properties have to be in rent ready condition. To be specific, most guidelines call for the property to be in C4 condition with no issues with the 4 major components: roof, HVAC, electrical, and plumbing.

I have done 100s of DSCR loans on the lending side and as far as a lender preventing you from doing rehab after you have closed, I've never heard of that. How would they even know? They are selling the note to Wall-Street within 30 days and they aren't policing the houses. If you tell them you are intending to knock down walls or do major rehab, then of course they would probably just steer clear of financing the deal. If you need any advice, feel free to reach out.

Hi @Hector Lewis

How many units is the property? A lot of DSCR lenders should be able to help, as minimum loan amounts go down to $50k with some lenders. They may have a "Per Door" value, so that is why I asked about how many units. I'd be happy to connect to see if I can help or give you some recommendations. Feel free to reach out.

Hi @Dan N.

As some have indicated, you will eventually (or more than likely) need to start holding in an entity to seek a DSCR loan for rental properties. If you keep seeking mortgages in your personal name, it is going to impact your Debt-to-Income and the banks will also cap their exposure to you. Thus larger operators tend to utilize LLCs to seek DSCR loans, which are not based upon DTI and don't report to credit bureaus. I'm not going to chime in on the legal side, but from a lender's perspective (I own a brokerage) you will severely limit yourself on your financing options if you are adamant to use your personal name. Lastly, when someone comes to us to refinance from their personal name into an LLC, we don't require they quit claim deed it, everything is done at closing.

Hi @Allyson Davis

If you have $250,000 in cash, your purchasing power is much higher than $240k. If you are solely looking for a more conventional/traditional loan, then you may have less due to Debt to Income restrictions but going with a DSCR loan would certainly increase your buy box. Most require 20-25% down, so that gives you an indication of what you can afford. Feel free to reach out if you need any advice, as I'm in the financing space. Best of luck!

Quote from @Shannon Rudelis:

Hi @Mark Munson!  

Thank you for your reply. I would love to chat sometime with you regarding OPM and scaling. I do agree, a local mentor would be ideal, but haven't had success in finding one. However, I haven't been super active in our local REIA either, so that is where I need to start. I'm still considering Jake's program, but will check locally first.

I would be happy to chat sometime. Message me at your convenience and we can set something up. 

Hi @Alon A.

     I think some additional context is needed. Yes you may be breaking even or slightly negatively cash-flowing, but it won't be for 30-years. Ideally, you select a 2 or 3 year prepayment penalty and refinance again when rates drop. At that time, the property will no longer be negatively cash-flowing or breaking even and you have probably benefited from 3 years of appreciation as well. I would personally take the money to continue to scale. Your answer lies in what you will do with that $30k. If that $30k gets you another asset, then I'd do it. You shouldn't just look at cash-flow, you should be looking at appreciation and tax advantages too. Can a cost segregation study on that rental and a second one offset your W-2 income or any other income, thus keeping more money in your pocket? Can that second asset appreciate well over 3 years too and build you more equity than the single property? There is a lot more that should go into this planning. If the $30k costs me 9%, can I turnaround and lend it out immediately at 12%? If so, I'm making more money. I'm not sure what the ideal situation is for you, but there is more context that needs to be weighed here. Feel free to reach out if you need any advice, best of luck!

Hey @Cameron Mitchell

You need someone to underwrite the long-term debt at the same time you purchase it, so you know that a BRRRR will work. As others stated, your current lender is charging a lot. Now, if they are lending 100% of everything, I understand the higher interest rate (most hard money lenders are between 10-12%), but 4% in origination is very high too. Again, if you absolutely need 100% financing, then it's okay. 

As others have stated, to cash-out at the maximum value (most DSCR lenders cap at 75% LTV on a cash our refinance), you need to own it for 6 months. There are a few lenders that will do 3-months, but they won't necessarily offer you the best DSCR terms. Also, a lot of them require you to do the short-term financing with them too, to waive the 6-months of seasoning. To truly BRRRR correctly, you need to be buying at deep discounts on the front end. Also, if you are aiming for a certain CoC return or amount of cash flow every month, you need someone that truly knows how to underwrite both loans for you and can tell you exactly what you would net and can justify it with solid figures and comps. With rates where they are and values going up (along with insurance and taxes), it makes BRRRR-ing much more difficult. You can buy a bit of time to wait the high rates out by going with a interest only DSCR loan to maximize cash-flow and refinancing in year 3 after rates have dropped.

If you are limited on capital, I would suggest being open to flipping one or two properties, then doing a buy and hold. The risk you are taking attempting to BRRRR without hammering out all the figures is that you will lock up all your capital into one rental and you are back at square one, with no ability to scale. Everyone BRRRRs to rinse and repeat their money, but there is no guarantee of that unless you truly know your numbers, inside and out. I prefer sprinkling in a wholesale deal or flip or two to ensure I can inject capital back into my company and continue to scale. Feel free to message me if you need help with the numbers or any more feedback.