All Forum Posts by: Oscar Francis

Lenders generally rely on formulas when arriving at the loan amount they are willing to extend to you, the borrower. Namely LTC/LTV & debt coverage ratio. The LTC/LTV is often very similar to the loans you likely utilized for flips but most lenders funding flip loans don't factor debt coverage ratio because the intent is to sell, not rent the home. Each lender will differ slightly and it's important to understand each lenders underwriting guidelines to make the most informed decision on where to park the stabilized property. In that respect there are formulas to be mindful of and you should think like the lender when you are analyzing your purchases.

At the same time there's no hard and fast rules or formulas an investor should rely on when underwriting their rental properties. Two I often see discussed in these forums is 1% rule and the BRRRR method where 100% recoup of down payment funds and closing costs are the end goal and if one or both of these boxes aren't checked the property is not considered. This can often lead to bad purchased since neither focus on the fundamentals of the underlying real estate which is what ultimately drives value, appreciation and net profit. Unfortunately most investors believe their excel spreadsheet will provide all the answers but I recommend combining your pro-forma with a greater emphasis on physical interaction with the properties and more importantly neighborhoods where you decide to invest.

Yes, make sure when all said and done your return is what you want. For me its 15- 20% NET. Now when you say "I should live buy when barrowing funds to purchase?" Well if its from a bank you do not have any choice. If HM, you also will not have much negotiating until you do several Its typically 35- 40% down 12 +  points,

Good luck