All Forum Posts by: Marty Johnston

@Brian Plajer I do both Residential and Commercial mortgages, and you could do either option in the scenario you presented, just structured in a variety of ways:

RESIDENTIAL:
1) 2 separate loans, one for each parcel/property, this will require all income documentation (pay stubs, W2s, possibly tax returns [if you have other SREO or self employment business income] and use your personal income + 75% of the gross market rents for the two properties to calculate your debt to income ratio)

COMMERCIAL:
1) 2 separate loans, one for each parcel/property, (NO personal income needed) using only the anticipated rental income from the property to service the mortgage. Commercials DTI equivalent is D.S.C.R. (Debt Service Coverage Ratio). Most lenders like a 1.20 DSCR, some will go to 1.10, others 1.0 (1.00 DSCR would mean that for every $1,000 in a mortgage payment [PITIA], you receive a gross $1,000 in monthly rental income. 1.20 DSCR would mean you receive $1,200 in gross rental income on the property), and there are even no DSCR programs out there so you can show LOSSES and still get a mortgage. These no DSCR loan programs are mostly reserved for STR's or where the borrower recognizes future opportunity to raise rents that a lender can't utilize for qualifying at time of purchase.

2) 1 blanket loan to purchase both properties. (NO personal income needed) using only the anticipated rental income from the property to service the mortgage as well. Note some lenders require that a portfolio has a minimum of 3 properties to consider a blanket loan. This will depend on the lender. Some will still consider just the two.

Keep in mind, commercial lenders will usually have both of the following:
1) Minimum value per property, based on the appraised value or purchase price (whichever is LESS!) for 1-4's this is often times $100,000, but some will go as low as $45,000 in a portfolio loan

2) Minimum value per UNIT. This one often goes missed by investors. This basically means if you have a 3-Unit property, and you're purchasing for $105,000, you MEET the minimum value per property requirement, but this property represents a value per unit/door of $35,000. This is below most commercial lenders minimum value per unit requirement. In this same scenario, if this was a 2-unit, you'd ave a value of $52,500 /unit, which MEETS most lenders minimum value /unit requirement + value /door requirement.

The above scenarios can sometimes be 'dismissed' or exceptions given when loan amounts exceed $1,000,000.

Hope this helps!

@Troy Ronald

Congrats on this opportunity in Detroit! Is your exit strategy to refi/hold or sell/flip?

In short, you could pursue either option you presented.

There are many lenders out there who will finance both the acquisition and the rehab in one loan, however most lenders like to see that you have someone in the borrowing entity with prior experience in renovating a project of this size. Most lenders will lend to first time rehabbers on 1-4 unit investment properties, but experience matters a lot more (to most lenders) when tackling a 5+ MF renovation project of this size.

Generally speaking, if you can bring rehab experience to the project, have liquidity for 20-25% down (depending on ARV and experience) + closing costs + liquid to start the rehab (then reimbursed in draws as work completed), you should be able to obtain financing on this project. A lot of variables to consider though to determine what route will work best for you!

Hope this helps. DM sent also.

-Marty J

@Courtney M. Looks very doable. You mention ARV, are you also seeking Rehab funds or are you simply referencing what it could be worth after you acquire and rehab in the future?

Basically, is the property stabilized/livable as it is now but with value-add opportunity in the future? Or do you have a Rehab Budget to accompany this acquisition and are seeking an ARV loan?

Thanks in advance.

Hey Courtney!

Oh no! Sorry to hear about your situation here... A little more info might help:

• What is the purchase price?
  What is your OTP Closing Date?
  If said rock-star can't perform, is an extension at all possible?
  What LTV do you require at absolute minimum?
  

Thanks in advance!

@Rita Naga I sent you a DM with more info. Look forward to connecting!

@Amy Raye Rogers there are portfolio lenders who offer some pretty attractive terms on delayed financing for SFH's or 2-4 Unit NOOs. I see your in ND which may have some more limited options with some of the larger National Lenders in mind, but have you looked to some of the national guys? They'll go 30-yr ams, and why rates may be in the 4's or 5's, the longer am and options for I/O periods will still increase your cash flow. If credit is good, and DSCR is 1.1+, you may even be able to realize an 80% LTV on delayed financing, since it's treated as purchase funds rathe than CO Refi (which often takes a -5% LTV hit).

Hope this helps!

@Nathan Cornett Most commercial lenders who will allow for STR income will typically use 90% of the market rents per the appraisal's 1007 Rent Schedule. This is if the property is already vacant or already being used as a STR. If the property is already leased, then they have to use the 90% of 1007 Rent Schedule OR the actual lease in place, whichever is lower. There are more and more lenders allowing for STR's on 30-yr products, and the space is becoming more competitive, which is great for investors!

As @Tarik Turner referenced, the other way that some lenders allow for STR properties is by simply diverting all STR-use properties into their "No DSCR" Programs. Basically, they don't calculate a DSCR ratio but in turn, put a premium on the interest rate (usually around 1.0% increase to the rate). In theory, you could cash-flow negatively on these loans and still be okay, so long as you have the credit score, assets, and a pulse.

Hope this helps!

@Jacob Silberfarb you're a perfect candidate for "Delayed Purchase" financing if you've only owned them for 24 months! This allows you to obtain "purchase pricing" vs CO Refi pricing (which always takes a hit typically). There are some lenders who allow for this and will lend 'at cost' of the original purchase price + actual rehab invested. The other benefit to delayed purchase financing is if:

1) Credit is good
2) Property DSCRs well
3) These are all 1-4 Units

Then you could potentially get up to 80% LTV as well. These are with the non-bank type lenders offering 30-yr fixed terms. Rates on this money for SFH's starts in the mid to high 4's with buy downs possible into the high 3's, possibly high 4's to ow 5's on 2-4 Units with buy downs into the low to mid 4's.

If you really wanna get crazy, there are hybrid amortization options as well. 30-yr terms, but I/O during first 5 yrs, then converts to 5-yr fully amortizing loan (no balloon). Maximizes cashflow and still in the 4-5% range here (again assuming good credit, DSCR 1.1+, and good location). SFH's generally get better pricing than 2-4's, so that will play affect here too.

Otherwise, what you have here is a pretty typical PML quote IMO. 

Hope this helps!

@Rita Naga can you tell me a little more about the property itself? If the property has a DSCR < 1.20, have no fear, there are still some great options out there for you! A few questions:

1) Where is the property located?
2) What is the property type? (5+ MF? Luxury Condo downtown? Retail? Office? Mixed Use?)
3) You mention you're already in escrow, what's your Contract Closing Date? If it's <30 days, you may have no choice but to go to a "Bank Alternate" lender. These guys can close quicker assuming third parties don't delay things. Banks and/or credit unions will have lowest rates, but probably tap out on a 25-yr Am and 5-10yr balloon. They will also require the typical mountain of paperwork (Personal & Business Tax Returns, W2s, Balance Sheets, P&L, Pay Stubs etc)

Lot's to discuss and open up here! :)

@Rita Naga can you tell me a little more about the property itself? If the property has a DSCR < 1.20, have no fear, there are still some great options out there for you! A few questions:

1) Where is the property located?
2) What is the property type? (5+ MF? Luxury Condo downtown? Retail? Office? Mixed Use?)
3) You mention you're already in escrow, what's your Contract Closing Date? If it's <30 days, you may have no choice but to go to a "Bank Alternate" lender. These guys can close quicker assuming third parties don't delay things. Banks and/or credit unions will have lowest rates, but probably tap out on a 25-yr Am and 5-10yr balloon. They will also require the typical mountain of paperwork (Personal & Business Tax Returns, W2s, Balance Sheets, P&L, Pay Stubs etc)

Lot's to discuss and open up here! :)