All Forum Posts by: Michael Ochoa

Hello BP Community! You all have been great with your responses! I have another question on here. 

Let's say I've done 2-4 successful BRRRRs and would like to acquire a FHA/FHA203K loan without a W-2 job. Would the income from my prior BRRRR investments qualify me for an FHA/FHA203K loan? I know the income from a FHA deal could potentially help, but they do need to see "income". Thanks!!

Hello BP Community!

I have a couple of questions about the BRRRR strategy.

First, if I'm doing my first BRRRR and don't have reserves or capital (assuming the hard money lender covers 100% of the purchase price and rehab costs), is there a way to roll the monthly HML payments into the loan, or would I need to bring in a partner with reserves to cover those payments until I reach the rent/refinance stage?

Second, what are the key numbers and metrics I should focus on when doing a BRRRR? I know building equity is crucial for using as a down payment on the next deal, but how should I factor in cash flow? What calculations help confirm it's a solid BRRRR deal? Would this be projected rents, cash flow, and/or equity? And what about using a DSCR loan for the refinance? Any tips there? I'm assuming the goal is to secure the best possible interest rate.

I’ve been learning a lot lately and feel like I’m at the point where I want to take action, even though I’m nervous. I’m pretty introverted and usually keep to myself, but I believe I have a rough outline of the steps:

1. Talk with HML, shop for one that makes sense.

2. Find a distressed property that makes sense (through a realtor or other means).

3. Work with contractors for the rehab.

4. Rent the property out (1% rule, or compare nearby rents with the same kind of property), with a property manager in place 8-10% of the total monthly cash flow.

5. Refinance with a bank (DSCR or other favorable mortgage).

6. Pay off the mortgage throughout the amortization and use equity for the next deal.

Any insights, advice, or things you’d point out would be greatly appreciated!

Hello everyone! Second post here.I just spoke to a lender for the first time and had a few questions I wanted to clarify. I’ve heard that every lender is different, and wanted to come on here and ask some questions.

They told me that to qualify for a DSCR loan, I need to already have a property owner-occupied? Is this because they don't want you living in the property? I wish I had asked more questions, but I'm still getting used to having these conversations over the phone.

The lender also mentioned that I’d need to contribute at least 5% of the down payment myself, and the remaining 15–20% could be a gift — but not the full amount, that gifts can't be all 100% on down payments.  They brought up a few other things too, like unemployment being a concern and needing reserves. Could reserves come from a private lender, a family member, or a friend?

Is this guidance standard across lenders, or could it vary a lot depending on who I talk to? Thanks in advance for any insights!

Quote from @Kyle Deutschmann:

Quote from @Michael Ochoa:

Hello everyone!
This is my first post here, I am super new to real estate investing and I'm excited to begin my real estate journey. Over the past few months, I've been diving deep into learning everything I can online—especially about DSCR loans and multifamily properties.

However, I feel like I've hit a bit of a wall. I know long-term rentals are the path I want to pursue, and I'm aiming to use DSCR loans to start closing deals and build wealth toward financial freedom. But now I'm unsure what the next step should be.

Should I be reaching out to a realtor? How do hard money loans fit into DSCR-based deals? Should I use a hard money loan to pay for the down payment, and go to another lender for a DSCR loan at the same time? How can I do the math to pay them both back? And is there anything else I should be focusing on or learning at this stage?

Thanks in advance—I appreciate any guidance!

Welcome! I'm sure you could find an "investor friendly" agent here on BiggerPockets. Hard money loans are great for purchasing properties fast that need to be rehabbed. A DSCR loan can then be used to refinance/pay off the hard money loan if you keep the house as a rental.

Is this your first home purchase? I'd personally start with a house hack if it was my first purchase - you can buy a house with 0-5% down in most cases and then use that money you save on housing to snowball into the next deal. 

I am understanding more about hard money loans with all these replies! Thanks a bunch! Yes, this would be my first time ever looking around for an investment property. I would love to do a FHA loan house hack, but unfortunately, I don't have 2 years of work history/income. This is why I was interested in the DSCR loan, with ways to come up with the down payment once I've figured out a good market/investment. 

Quote from @Kerlous Tadres:

You're off to a great start!

Yes, connect with an investor-friendly realtor now they'll help you find deals, run numbers, and build your team.

Hard money is for the short-term (buy/rehab), and DSCR is for the long-term (refi once rented). You can't usually use hard money as a down payment on a DSCR loan, but you can use hard money to buy and rehab, then refi with DSCR after it's stabilized (BRRRR method).

Run the numbers: make sure after-repair value and rent support a cash-out refi and DSCR > 1.1.

Next step: analyze deals, network, and start making offers.

 Awesome, thanks for the info! 

Quote from @Steve Daddeo:

Hi Michael - Welcome to the journey. Great to see your enthusiasm and the research you’ve already done!

As for using a hard money loan to cover the down payment on a DSCR loan, I'd strongly advise against it. That kind of approach typically over-leverages the property, putting you in a risky financial position. If anything doesn't go exactly according to plan (vacancy, repairs, delays, etc.), you could quickly find yourself underwater.

Instead, I’d focus on one of two paths:

A) Save up the 20% down payment yourself. It may take time, but it puts you in a much stronger position, reduces your risk, and sets a solid foundation for your investing future.

B) Find a partner who can bring the down payment, while you bring the time and effort ("sweat equity"). You can handle the deal sourcing, management, and day-to-day work while your partner funds the project. It’s a great way to get started and build experience with less capital out of pocket.

You’re on the right track by educating yourself.  Stay cautious about strategies that involve stacking multiple layers of debt right out of the gate. Feel free to reach out if you want to talk more about partnerships or running the numbers.

Thanks for your reply, this is some great info. I will be messaging you about further learning! 

Hello everyone!
This is my first post here, I am super new to real estate investing and I'm excited to begin my real estate journey. Over the past few months, I've been diving deep into learning everything I can online—especially about DSCR loans and multifamily properties.

However, I feel like I've hit a bit of a wall. I know long-term rentals are the path I want to pursue, and I'm aiming to use DSCR loans to start closing deals and build wealth toward financial freedom. But now I'm unsure what the next step should be.

Should I be reaching out to a realtor? How do hard money loans fit into DSCR-based deals? Should I use a hard money loan to pay for the down payment, and go to another lender for a DSCR loan at the same time? How can I do the math to pay them both back? And is there anything else I should be focusing on or learning at this stage?

Thanks in advance—I appreciate any guidance!