All Forum Posts by: Robin Simon

I agree - I would look into a HELOC. Rates are too high right now to do a cash-out refinance and lose the 3.5% rate unless you really really know what you are doing and have a huge opportunity to immediately and purposefully utilize your equity capital

Congrats, are you planning to do further improvements now that it is rented to attain the quality of tenancy/property you think would be ideal?

I agree with @Nathan Gesner 

Frankly, You see a lot of people with less experience think that "being reasonable" and taking it slow with raising rents to market and confronting situations is best and that you can work together and "be a good landlord" - but in the real world, often it doesn't work out how you envision it and you can create resentment, false expectations and further problems.  Usually best to "grab the bull by the horns" and set firm and defensible expectations up front (you can always give concessions after this, but you'd be working from a better position)

Yes - the big advantage of the BRRRR method is to create value in the deal through a rehab that produces more value than the sum of its parts (purchase price + rehab costs), and then to recoup your equity in a quick cash-out refinance. If you buy without rehab, it will be practically impossible to get a quick cash-out refinance because there will not be a justification suitable for a lender for the jump in value

Recommend @River Sava

From a twitter series:

Why is  this boring innocuous sounding form is so crucial to financing your real estate investment properties?

What is the 1007 Form?

Standardized Fnnie Mae "Single-Family Comparable Rent Schedule"

It is added to certain appraisals to determine the market rent of the property by comparing nearby rented SFRs

1007 Rent = what you'd reasonably rent the SFR at if put on the market today

Typically, the appraiser will take three nearby rented properties, look at their in-place rent, and then adjust as necessary (i.e. if the property has 3 bathrooms vs. 2 bathrooms, adjust accordingly). 

Nature of the market will determine adjustments and rents.

Suburban PUD - driven mostly by property quality and beds/baths
Condo Tower - views and floors can be huge?
Beach Town - nearby properties, one walkable to beach, one not, can make a huge $ difference

So why is the 1007 so important for financing SFRs?

Typically a lender will give you credit for the LOWER of the 1007 market rent and in-place rent. Or if Vacant, will use the 1007 market rent.

Even if you rent it above market, lender assumes it will eventually converge.

Additionally, as more investors shift towards short term rentals and medium term rentals, some appraisers will have trouble accurately determining rents in markets that cater to these tenancies

i.e.
STRs in beach or ski towns
MTRs near hospitals that hire a lot of travel nurses

1007 Market Rents are crucial for qualification on investment property loans, esp. "DSCR" loans. Deals can be tripped up near the finish line if rents come in low or if the appraiser can't do a 1007 form based on specific market characteristics (i.e. STR/MTR idiosyncrasies)

Bottom Line?  Make sure when financing an investment property that you have a good grasp on the importance of a 1007 form and insist that the appraiser has a rock-solid understanding of the nuances of the local market, especially if its a MTR/STR area

I think this sounds like a decent rate in today's climate, 3-year ARM is pretty short comparable to 30-year fixed rate and the 7 or 5 year ARMs out there though

 If its hard money, then theres generally not a lot of standardization

If you are using a standard non-QM DSCR product, then yes, you would need to provide the leases and the third-party appraisal will confirm vacancy/tenancy

What type of lender are you working with?  If its one lot, we would typically be A-OK with 2 leases and treat it most likely as a 2-unit loan

It still should be about the similar spread (75bps or so), but there are a lot of levers you can pull more easily on DSCR such as buying down points, heavy prepayment penalties, flexible underwriting guidelines that can make the rate equivalent or even better than on the conventional side