All Forum Posts by: Mark Munson

Hi @Christopher Lynch

     In an ideal scenario, you'll need roughly 10-15% of the purchase price, average closing costs in your market, financing costs (2-3% of the loan amount is a safe projection), some reserves for monthly payments, and roughly 10-15% of the rehab budget to get started (reimbursed on a draw system). You can probably make it work without having all of that, but saving that much will mitigate your risk. 

Great advice. I have a colleague that acquired over 10 facilities in roughly 3 years doing off-market mailers/cold calling to mom and pop operators. It can be done, just need to put in the work and build relationships with the owners when possible. 

That’s a fair point in regards to doing a buy down, we see that quite often but we roll the buy down into the loan so those aren’t paid at closing, thus not costing the borrower funds out of pocket at the time of purchase or refinance. 

It may not be indicative of their capitalization (albeit it is an indicator of their capital partners cost of capital to a degree), but there are numerous lenders still offering less than 2 or 2.5 points on DSCR loans out there, so it's worth shopping around for borrowers. The point being is that a lender that gouges a client is either getting their capital at a higher cost or they view the lender and borrower relationship as transactional and don't see the lifetime value of the relationship, in my opinion.

Hi @Jon Cave

    If you don't want to wait 30 days, you may want to do a cash for keys option. Offer them a small amount of money to vacate sooner.

Hi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:

1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.

2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.

3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.

If you need more feedback, happy to help. Best of luck!

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

@Nathan Frey  

If you do a 2nd lien, just make sure the first lien holder is okay with that. If you do that on a HM loan and the 1st lien-holder finds out, they can freeze the rehab funds. I'm not sure what the 1st position financing looks like, but many times in the HM space they don't allow 2nds. 

Hi @David Feng

I can help you out, seems fairly straightforward. Feel free to message me and I can give you a few sources. Most DSCR lenders want it in an LLC, so I'm not sure why you are hearing otherwise.

If you use it as collateral in a portfolio, then no. If you separate the two, then yes obviously. The difficulty is doing one by itself is that it will fall below most minimum loan amounts in the DSCR space (min. $50k loan amount most of the time, if not $75k). Maybe speak with a local bank too.

Understood. If you need any more advice, feel free to reach out. I own a commercial mortgage brokerage and we private lend, so happy to answer anything I can.