All Forum Posts by: Patrick Roberts

Yes, there are approx that loans that should be in foreclosure, but theyre not, and in my opinion, are unlikely to be. If you look into the data, you'll see that something like 500k of these are 90+ delinquent, but the average days delinquent is over 500. These loans have been sitting in limbo for years, and my guess is that it's unlikely they ever make it to foreclosure. There are so many programs for homeowners to mod, access forbearance, etc, to keep them in the homes that I doubt these are resolved anytime soon. 

On the other hand, I think investment loans are something to watch for forced selling. A lot of DSCR loans being made right now are on the fringe of solvency, and I expect more pressure in this market segment as operating costs continue to rise and rents continue to stagnate over the next couple years.

Check with Dan Rivers and Mike Savage - theyre the local STR experts.

North Charleston just passed regulation similar to Charleston for STRs if I remember correctly. You have to have a permit and they limit the number of permits. You also have to have at least one dedicated parking space and the manager has to be available 24/7 to be on-site within 30 minutes. In Charleston, I believe the rule is that you have to live on the property as your primary residence unless the property is in an STR overlay district.

I personally know some investors who are starting to struggle a little with occupancy/bookings. This market is somewhat saturated, but there are pockets where STRs are still viable. Dan Rivers will probably have better insight. 

Make sure you account for SC property taxes correctly in your analysis. This is the most common mistake I see investor clients make in this market because there is a huge difference between legal residence and non-legal residence taxes. Also, expect insurance to be significantly higher than other areas of the state and country. I typically use 0.8% of the property value as a starting point, but this will depend heavily on the age of the roof and the structure type and age, as well as deductibles on wind and hail. 

What are you trying to accomplish with the new loan? Are you just wanting to pay off the existing lien, or are you wanting to pull cash out? Since you plan to live in the house, DSCR loans and other commercial options are off the table. For Conventional, here are the basic products:

- Delayed Financing - this is basically getting a purchase loan after having paid cash. The lender treats the loan as though you were using it to buy the property. This can only be done if youre within six months of the original purchase and if you truly paid cash. The lender will use the settlement statement amounts for calculating LTV and other figures, not the current appraised value. Since you used hard money, this wont be an option.

Rate and Term/Limited Cash-out - you can rate and term refi the existing lien and purchase money 2nd liens into a new Conventional loan. Closing costs can be included the loan amount. You cannot receive more than $2k cash back at closing. No seasoning requirements - you just have to be on title. 

 Cashout Refi - To receive cash from the loan greater than $2,000 or to payoff non-purchase money 2nd liens. You need 6 months on title and 12 months seasoning on the existing note to qualify. 

Since this will be your primary, I would probably R/T refi the hard money into a Conventional loan and then get a heloc on the property afterward. The heloc requirements will vary by lender as these are mostly done by banks using depositor funds - they will all have slightly different requirements and will not follow conforming loan guidelines.

The LTVs for R/T and cashout refi's will be based on the new appraisal completed during the loan underwriting for the new loan. The appraiser will likely want to explanations and documentation to justify the increase in value from the original purchase. 

The kind of debt youre looking for is out there in the alternative funding/working capital space, but be warned - it will not be cheap. As in APRs of 60%-130%. The lack of FICO scores wont help.

Lenders will underwrite against your revenue and the business assets. Given the situation, expect to collateralize everything - UCC1s for all assets as well liens/mortgages for all titled/capital assets. 2nd position may fly for real estate assets, but expect to have to buyout any existing 1st position UCCs that are not bank UCCs. The lender will likely cross-collateralize all of your FL entities. Relationships will matter. Any decent lender will want to dig into your business and personal background and will look at the lifetime value of the relationship, not just a one-off deal.

You're going to have to jump through hoops, too, like lockboxes or even notification-based factoring for all of your revenue/leases. Expect mezzanine-like debt structures that will allow the lender to push you out and take control of your entities if you default.

I'd start with lenders like Loanspark, Breakout Capital, Channel Partners, etc. ROK Financial runs an exchange that also has some real estate outlets. These lenders wont lend directly on your kind of deal, but they're typically the borrower-facing subsidiaries of asset managers, and their account execs will have partners to refer you to. I expect that someone will put you in touch with a some small, niche REPE shop that will likely take you up on this. 

$288k is 75% LTV. Also, at $275k on a 30yr FRM and 7% on the note, the P&I is $1830/month. Given the figures youre providing, youre probably getting hit with a restriction on LTV and loan size due to the debt service (or lack thereof). This means youre going to need to bring additional cash to close to payoff the existing lien because it has a balance of $300k and your borrowing less than that. The $34k cash to close is probably a mix of loan costs, prepaids, and the remaining needed to buyout the hard money position.

It sounds like the math checks out, but the underwriting doesnt. Since you'll be bearing the credit risk on this, do you think that the deal would be sound for your borrower and that they would be financially solvent to pay you without defaulting? I personally prefer carrying notes to owning rentals, but the credit risk has to be solid, too. I would underwrite it just like any other lender would. If they dont have the capacity to repay because theyre overleveraged, then theyre promise to repay may not mean much. 

People have been predicting that rates will drop since the end of 2022. The ten yr yield hit 4.1 earlier this week - a 3 month low - and shot right back up to 4.3 in two days. It could be 6 weeks or 6 years before rates are significantly lower - it's impossible to know. 

For the rental at 9%, I would absolutely price out a R/T refi on it right now. Unless the balance is low, you'll likely recover the refi costs in a year or so. Get some actual figures and make your decision from there. 

You're buying a primary residence, so most of the typical investment loan/creative financing tricks go out the window. You cant really directly use another property as collateral or cross-collateralize in this case. If your FICO was higher, you could possibly cashout refi or heloc the condo, but you would still get better terms on the purchase loan so that wouldnt make a ton of sense. 

Look into an FHA loan for a duplex. Just watch the 100 mile run with your income - it's probably going to wreak havoc on your DTI. If you get into an FHA 3 or 4 unit, you will have to deal with the self-sufficiency test, and I dont know how many multifamily properties in FL will pass this.

Couple ways to potentially tackle this. For Conventional, if he previously worked in the same industry, makes approximately the same (net) as he made while working as an employee, and has at least 12 months of SE history on his 2024 tax return, he may be able to squeak by. 

There are also bank statements loans as long as he has at least 10% down (20% is much better) and good credit. These will use the cashflow in his bank statements rather than his tax returns to determine qualifying income. Typically, between 1 and 2 years of SE history is doable with these, but less than 12 months is not. 

Last option is to seller finance and then sell some or all of the note(s). There are a lot of nuances to how this is set up, and you will take some amount of a discount on the value of your note(s) when selling, but you could sell some or all of the note(s) within 6 months to a year to convert them to cash. The value of a note is determined by a lot of factors, so you'll want to partner with someone with expertise to set it to bring the most value. This is not something to DIY.

Ok now I'm confused - youre buying a property thats in need of rehab with a DSCR loan, but yet only needs a light rehab to pick up almost $100k in value? A lot of stuff seems off here. I'd double check that your lender/broker knows what theyre doing.