All Forum Posts by: Mark Towey

Hey Omar,

Welcome to the real estate world! BiggerPockets gets better with every new member, so we're glad to see you here! DSCR (Debt Service Coverage Ratio) loans are a popular option for investors because they come with several key benefits that set them apart from traditional loans. Here's a quick breakdown of why they might be a good fit for you:

1. No Personal Income Requirements (No DTI): Unlike conventional loans, DSCR loans don't rely on your personal debt-to-income (DTI) ratio. The loan approval is based on the property's rental income covering the mortgage—making it easier for investors without traditional income streams to qualify.
2. LLC Protection: Many DSCR lenders allow you to hold the property in an LLC. This is a huge plus because it offers liability protection, meaning your personal assets are shielded if there are any legal issues with tenants or the property.
3. Doesn’t Appear on Your Personal Credit: One of the big perks is that these loans don’t get reported on your personal credit profile, so they won’t impact your credit score or debt visibility. This is especially helpful if you plan to continue investing and don’t want multiple mortgage loans affecting your credit report.
4. Streamlined Process: Since DSCR loans are focused on the property's cash flow rather than personal financials, the approval process can be quicker and less documentation-heavy compared to traditional mortgages.

If you want more info or need help getting started, feel free to reach out! A mortgage broker specializing in DSCR loans can help you find the lowest pricing for your specific transaction out of hundreds of potential lenders. Happy to help anytime --

 I was just reading some older posts on the topic and people were saying they're only getting about 2% option fee. Would you say thats about where you're at?

@Mark Towey

Mark, thanks for reaching back out to me.  And, for providing more information.  I have a few recommendations to get you started in learning what matters when becoming an investor focused realtor.  Please know that I was a real estate investor for most of my life as my family is big in 'dirt.' I was also ran wealth banks so building wealth, valuation, lending were also part of my toolkit before opening my own investor firm.  Start with:

1.  Attending every inspection you can.  Follow/shadow the inspector - LEARN. Ask questions.  Knowing construction and building codes are critical to building credibility.  Read every 4-point and wind mit you can get your hands on.  And, also attend appraiser walk-throughs...read every appraisal report for investment properties that you can beg, borrow, steal.

2.  Collect names of trades; and do this by seeing who is working in your market and at what properties.  I don't recommend approaching them on the job site but it's not a bad idea to follow-up by phone later to find out what type of jobs they specialize in and who is fueling their business.  Keep a current contractor's contact list.  And, make sure you vet the heck out of them before ever referring/recommending.  And, I don't mean vetting by checking google reviews...perfect five star ratings means the guy's got a lot of cousins.  Do the deep dive.

3. Talk to lenders who specialize in investment financing.  LEARN.  Know their criteria, know current rate structure, determine what type of financing they're the best at doing.  This isn't Fannie/Freddie stuff.  And, as such, make yourself a cheat sheet of all the terms and calculations that are used in financing and in valuating properties and return.

There's a lot more to it - and not one of these can be done quickly. If you 'wing it' with an investor, you'll get to 'wing it' ONCE. You won't get another chance after that. Until you know the market, the business, the market demand, how to assess ROI, Cash Flow, Valuation - don't even attempt to jump in. Build your knowledge, your bench strength (you will never be the expert in every aspect of real estate investing because it's complex, ever changing, and lots more).

Hope this helps.  I hope you'll look at building your business by building your knowledge and expertise as an everyday investment in yourself and your business.  Feel free to reach out to me if you want me to increase your homework!  It's worth the time, effort, and feeling small before making it big.  Best...

Just a few questions for you...

1. How many realtors is that investor working with currently?

2.  What is his budget for purchasing and renovating?

3. How will he acquire the properties? Do you have a POF or prequal?

4.  How will you get paid?  If you approach a homeowner who hasn't listed the property, they're under no obligation to pay you a commission.  It doesn't sound like the buyer has offered to do so.  

As a fairly new realtor, this is a strategy that could burn up a lot of time and leave you with a whole lot of nothing.  I know you know that a lot of people living in run-down houses arent' the owners right?  And, some of those types of owners are loving the cash flow they're receiving on their slums.  You don't become an 'investor realtor' by acquiring an investor. You have to know that side of the business and that only comes with a lot more knowledge in analysis, markets, renovation costs, scope of works and more.  I recommend that you select a market and make yourself well-known in it.  Know the business.  Protect yourself (you would be surprised how many realtors do a whole lot of work for someone and then don't get paid...happens every day).  Again, start by making yourself the most visible and knowledgeable real estate professional in your market. You do know I still study a couple of hours every day as this is one complex and changing industry.  I hope you'll rethink the opportunity, shore it up, and approach it from a different angle.

Talk with your broker. I am not licensed in your state but generally you can have the investor buyer sign a buyer broker agreement that spells out compensation should you be the one who brings him a deal, who pays, how much, etc. If you are also trying to represent the seller too on a deal you are bringing your buyer, you need to make sure that dual agency is legal in your state. Again, talk with your broker about what the rules are for your locality before getting into a sticky situation.

Best of luck!

It's best to keep a flat rate for utilities and not have the awkard 'venmo me $X' conversation. Get them to set up automatic bill pay as well so you and they don't have to think about payment. You should absolutely have them sign a lease. Apartments.com and BP are great spots for the lease.

I agree with @Conner Olsen above.  I am a Realtor and househack as well.  I am currently in a single family house hack.  I include utilities in the rent and the tenants are perfectly fine understanding that they pay a little more for the room but everything is taken care of.  I set up payments through RentRedi.  I love this platform personally.

As far as the lease and renting to friends:

Yes, have them on a lease.  Rules need to be spelled out up front.  Renting to friends is a personal choice depending on your comfort level with mixing business and friendships.  At the end of the day, rental property is a business.  If they don't pay, they don't stay.  Period.  Unfortunately being "understanding" of hardships or being too accommodating can get you screwed in this business if you are a people pleaser.  I learned the hard way. Be very upfront with the terms and let them know, the lease is not flexible and the terms are to be followed explicitly to protect both the tenant and owner.  It can be very tough to 1. have this conversation with a friend, 2. enforce the lease if things go south with a friend.