All Forum Posts by: Nick Belsky

@Kelly Beck

$30k or less and not hard money? No. Even then it wouldn't be a DSCR loan, more of a bridge loan. Granted there is limited info here, but this strategy seems very risky to me. Best of luck.

Cheers!

@Maurice Roman

DSCR lending has no DTI requirements and many lenders have fairly high or no exposure limits... As you've pointed out, you will need 15-25% down for most deals to get financed.

BRRRR could be a method, as many lenders can get you into the property for as little as 10% down, will finance the rehab, then you can gain some cash on hand with a cash out refi if you intend to hold (or sell if you are looking to build cash quicker). These loans also do not look at DTI.

Some lenders will even allow you to cross collateralize some of the equity in your existing properties to use "like cash" for new acquisitions, but be cautious with this approach.  If you get into a bad deal, all of your crossed properties will be at risk save only the one.  Very few lenders do this and they typically have hefty fees.

With only having 2 investments, I think you will be hard pressed to find many JV/PE partners who would work with you due to limited experience. However, never say never. You could always speak to family and friends to help raise some private capital, but also be weary of partnering with family and friends... Lol.

Cheers!

@Eric Miller

Best depends on what is more important to you... lower costs or lower rates.

Typically, conventional will have lower costs as there are no funding fees and such. They also have lower PMI costs (if your LTV is over 80%).

FHA will have lower rates, higher PMI costs (if your LTV is over 80%), and higher overall costs as they have a set funding fee. You can roll this into your refi though... or not... it is your call.

Working with a mortgage broker can help you put these options side by side and ensure you are getting firm numbers.  

Cheers!

@Robin Cochran

There may be a path here based on a few factors.  Being free and clear may be your saving grace.  I will disagree with most on here as financing shouldn't be too tough.  We have excellent resources for mid-construction flip/GUCs and do them quite often for clients in the same position as you are now.

The harder part, often overlooked part, is the insurance carrier.  98% of carriers will not insure this or at least not for a "lower" premium.  The best bet is to update coverage with your current carrier, switching to a new one is almost never going to work as they don't won't to inherit another carrier's starter project and potentially have existing work pop up with issues from before the new carrier began coverage. 

I see insurance kill more mid-construction deals than lenders not being able to finance.

Happy to chat if you'd like.

Cheers! 

@Nicholas A.

There is a simple answer here. Do a rate and term refi instead of delayed financing. They won't source your funds to purchase. If the newly appraised value is higher than $150k, you can offset you cash to close with the new value's equity. If the property will genuinely appraise at $150k, then you will need to find a delayed financing lender that doesn't source funds for the purchase. There are plenty of DSCR lenders that will do this.

Are you working with a mortgage broker?  They can easily guide you and help you get this done.

Cheers!

@Ron Amshalom

Are you working with a broker? There are programs out there that do NOT penalize you as a foreign national at all with DSCR. I have several clients we close with at 75/80LTV on purchases and rates right there with US citizens pricing.

Cheers!

@Daniel Hartz

5% down on 2-4 units is a standard guideline now.  Anyone lender can do this unless they have overlays preventing it.

Cheers!

@Ryan Butler

I am on the financing side of things and we work with a lot of new and seasoned flipper for financing options.  There are quite a few options out there and each has their own specialties of what they do well and what they don't do well.  Starting out, liquidity is usually one of the larger components for financing as most lenders will want to see that you have x amount of reserves available beyond down payment and closing costs.  The reserve requirements vary greatly from lender to lender.  Many also require seasoning and sourcing of these funds.

With no experience, most lenders will want to see 20-25% down on the purchase price, but there are some exceptions.  We can often get 10% down for new investors based on FICO, subject property location, and ratios of the deal.  The higher down payment can be very restrictive if liquidity is not sound.

Are you working with a mortgage broker who specializes in fix and flip or BRRRR lending?

Cheers!

@Bryan Lewis

#1, your lender is incorrect. You do not HAVE TO go into a ballooning mortgage. You can simply use your entity and use a DSCR product to be in a 30 year fixed rate mortgage just like a conventional loan, but with different qualifying income approach. DSCR is designed for investors and entities. There is no need to do a bridge loan unless you are working against a tight closing deadline or need to roll rehab funds into your initial loan. IMO, get a different lender who knows investment products.

#2, Fannie does have a provision where you can QCD to an entity after 6 months of ownership on an investment property.  The entity may be questioned and you will have to show controlling ownership to avoid the Acceleration Clause, if they even catch wind of it.  

#3, although there is a real risk here, I've never met anyone (client or lender) who has seen an Acceleration Clause acted upon for only a QCD change.  If there are late payments, change in ownership on deed with no continuity, etc... sure... then the risk factor is much much higher.

The notion that investors must use conventional financing is far outdated as DSCR programs are not only equally competitive in costs to conventional, but have far greater exposure limits, if any. Many lenders will allow investors to have 100 DSCR loans if those wanted to. With conventional, you are capped to 10 (11 if Freddie). Period. Not to mention the ridiculous hoops to get DTI qualified (not to mention no file will be UW the exact same way twice). Conventional financing is designed for consumers buying personal homes, not for the average business owner or investor. The guidelines make that more than evidently clear.

Cheers!

@Mak K.

Always shop around with brokers as they can check multiple carriers at a time for you.

I always recommend these brokers to my clients:

Goosehead - https://www.goosehead.com/

Brightway - https://www.brightway.com/

NREIG - https://nreig.com/

Obie -https://www.obieinsurance.com/

For direct carriers, if State Farm or USAA are a fit for you, they are tough to beat as well.

Cheers!