All Forum Posts by: Stephanie P.

An LLC does not define the mortgage type any longer. Fannie and Freddie now permit properties to be acquired in an LLC so conventional mortgages apply. Commericial Lenders will want to avoid a property under 4 units due to the disclosure requirements that come with 'residential properties." So, directly to your question, you would be financing with a conventional mortgage.

Hope this helps.

An entire lending industry exists which originates 1-4 unit non owner occupied purchase and refinance mortgages based on the following criteria:

1. 75-80LTV
2. DSCR1.0 or greater
3. Credit score, higher scores lower rates. Generally 66o minimum for a 30 year. Some lower.
4. Reserves such as, checking, savings, IRA or 401 K or cash value life insurance 6-12 months of mortgage payments.
5. No lates payment on mortgages of any kind
No tax returns just application, bank statements, LLC docs and the other stuff. Underwriting around 30 days to close. Rates are around 7.75-9.5.

These loans are a good alternative to conventional loans. No limit on number or amount of properties so long as you have adequate reserves. Obviously they are property specific since the rent has to support the loan amount. These lenders do not discount the rent significantly for vacancies or expenses. Short term rental mortgages are available at slightly higher rates either based on historical income or AIRDNA stats. Good luck and keep moving forward.

Thank you, this is great information and seems to fit what we are looking to do. Now will need to put the time in to generate those requirements. We have enough cash to buy one rental property outright. This should allow us to generate monthly income for the LLC for awhile which will make the DSCR really great when it comes time to buy the second unit. Will need to work on the rest of those reqs. Thanks again.

Chad

Congratulations on your success.

If you have enough to buy one property outright, leverage that money to buy 5 with a DSCR loan. Use other people's money to scale your business. One girl's opinion.

Stephanie

0 Votes

Las Vegas, Nevada

0 Votes

Quote from @Ronald Fontenot Jr:

I've found a 4 plex that has piqued my interest. It's recently remodeled and vacant, but ready for renters. It has one 2/2, two 2/1s, and one 1/1. I've run analysis conservatively and it seems it will cash flow fairly well.

I'm not interested in house hacking, my family is too large for the 2br units. I'm a 1099 and always have been, so leaning toward a DSCR loan.

How long are typical DSCR loans offered for? And do they require the units to have a track record of rent as they are vacant and seller has no rent roll or ledger.

Any advice appreciated!

If you're looking for cash flow, a 40 year, fully amortized, fixed loan is available. PM for details.

Stephanie

0 Votes

Quote from @Cheryl Walker:

I am looking to buy a 5-unit property that is fully furnished and doesn't need repairs. The units are currently all AirBNB rentals. I want to live in one and use the income from the other units to pay the note. As of now the property is grossing about $205k/year. The asking price is about $1.3M. Where should I look to finance this type of purchase?

What's poor when you're talking about poor credit?
Recent bankruptcy? Foreclosure? Those take a few years to heal. A collection? Could be a quick fix.
DSCR is not a viable solution for a borrower with poor credit, especially if you're planning on living in the property. If it has 4 units or below, you should look at living in one and going with an FHA loan. It's the most forgiving loan program and it's designed for new investors.
Beware the self sufficiency test. If the property won't stand on its own (3-4 unit property) with rents from 3 of the 4 or 2 of the 3, then it won't qualify.
All the best
Stephanie

0 Votes

Quote from @Pete Abilla:

Quote from @Greg Kasmer:

Pete - I've refinanced a few (3) single families at a time and the lender used a comparable approach, but not sure if that would have changed if I would have had others to refinance (I was comfortable with the mortgage on my other properties). I think the most accurate way to determine the approach would be to ask your lender based on your specific situation - number of properties, etc... My thought is that when you refinance 5+ properties (multifamily size) that may trigger more of an NOI/Cap rate approach with a lender. Good Luck!

I should've been more clear - we're looking at refinancing 50+ single family rental portfolio - and I'm hoping for the NOI/Cap Rate valuation model, but I've heard conflicting reports that maybe the comparable approach might be used.

The portfolio lenders we use require the comparable approach. Each property needs to be appraised individually.

1 Vote

Quote from @Frank Teshima:

Hey BP,

My team and I are heading to Kansas City, to visit the market, meet with local professionals, and walk some multifamily properties. We would love to connect with anyone who is in the market, and/or receive any recommendations for brokers, PM's, or attorneys, while we are there. Please reach out!! Looking forward to hearing from you folks!

We've closed multiple loans in KC. I'll PM you a really good Realtor for multi family properties.

0 Votes

Kansas City, Missouri

Quote from @Phyllis Kelly:

TIA for all the advice and opinions, this forum is always so helpful.

I am wondering about acquiring additional loans going forward. I purchased my first rental property (duplex) in October of 2021. It was a house hack- I lived in one unit for a year and am now out. There were a lot of expenses for repairs and remodeling that I wrote off in my own personal taxes in 2021 and 2022. So much so that my AGI for 2022 was only $30,000.

I'd like to apply for another loan this winter. My question is, will lenders mainly be looking at my total income, or will they be looking at my AGI from 2022 tax return? I'm wondering if that hurt my lending worthiness to write off all those expenses.

Hey Phyllis

Get with a conventional loan originator and ask them. Get some referrals either from BP or local REIA's or Realtors that are busy. You may be able to qualify just on your W2 income without tax returns.

Stephanie

0 Votes

Cincinnati, Ohio

Quote from @Bianca Cadogan:

Hello, I'm not so new to the forums but I don't post very often. I normally just come to absorb the information and intelligence from this platform. I'm very interested in a property that's out of state and I would like to purchase this property. It's a 16 unit apartment building that needs a little work done too but not too much. The current rents are below market now and I've run the numbers and it looks like it would be a great investment property with great ROI.

Is it possible to get a DSCR loan without experience or is it only for seasoned investors? I currently own a 4-unit building and really want to expand but need some advice. Anything helps!

The max we're seeing for DSCR is 24 units.
PM sent

0 Votes

Washington, DC

Quote from @Gina Shumway:

I am set to close on a BRRRR property with a series LLC on 4/17/2023 (with cash). Our LLC funds all the Renovations in cash as well. This is our second BRRRR property. Renovations should be done in 4-6 weeks.

This property is in chattanooga TN.

I am searching for lenders on a cash out refinance. I'm really hoping for 80% LTV. Since it's an LLC I assume we can only get a DSCR loan. Our first loan did not have a seasoning period, which was wonderful. I would love that bonus again if possible. If you are a lender who could help me with this, please contact me.

Hey Gina

Structure is really important on these type of purchases where you plan to do the refinance to get your cash back out quickly.

Most DSCR lenders require a 6 month seasoning period to use the new appraised value after renovation for the refinance. Some go down to 3 months for cash out.

If you are okay with leaving a large portion of your cash in the property, you can cash out right away up to the purchase price (minus 25% typically). The purchase price would be the amount used for the refinance up to 75% loan to value (or the appraised value, whichever is less).

When I say structure is important, some lenders will allow you to add in verified renovations to increase the purchase price. They definitely will if you pay them out to a contractor on the initial settlement statement. For example, if you have a contractor that's going to renovate the property you're purchasing for say 100K and you have the cash to pay him, put it on the settlement statement and have the attorney escrow it so you pay the money, but the contractor doesn't get it until he performs the work.

2 Votes

Chattanooga, Tennessee

Quote from @Rahul Munot:

@Stephanie P. -- QQ on interest only loan. Please advise.

Let's say the interest rate is 6% on a $600k property. Then the month payment would be $3k and it would remain constant until the duration of the interest only period.

However, if we do a regular conventional loan with both interest and principal payment then on a similar mortgage then my fixed monthly payments are somewhere around $3.6k. Since a portion of $3.6k is going towards principal (3k - interest & 600 in principal) overtime, this will help me reduce the interest amount as well.

So overall, interest only loan helps with immediate cash flow but on the flip side you don't build equity. Is my understanding, correct?

Yes, you have it right.

In your example, you would take 600000 x .06 and get 36000 and then divide by 12 (if it has a 12 month term). That would give you the 3000 in your example and that would be the monthly payment.

On the same 600000, on a 30 year fixed at 6% interest, the principal and interest payment would be 3597 with a varying amount going to principal and interest each month.

The cash flow for the initial period would be higher, but there would be no equity increase.

Interest only is for cash flow and acquisition and nothing more.

Stephanie

1 Vote

All Forum Posts by: Stephanie P.

Stephanie P. has started 186 posts and replied 4623 times.

Post: Mortgage Loans for an LLC

Post: Have a blessed Easter

Post: DSCR Loan Length

Post: Is it possible to get private funding of $1.3M as a new investor with poor credit?

Post: Refinancing single family rental portfolio

Post: Heading to KC on 4/11/23; Looking to connect!!

Post: Regarding Mortgage Loan Credibility

Post: Is a DSCR possible for me?

Post: Cash out refinance on BRRRR

Post: Cheapest mortgage loan

Stephanie P. has started 186 posts and replied 4623 times.

Biggerpockets Logo Post: Mortgage Loans for an LLC

Biggerpockets Logo Post: Have a blessed Easter

Biggerpockets Logo Post: DSCR Loan Length

Biggerpockets Logo Post: Is it possible to get private funding of $1.3M as a new investor with poor credit?

Biggerpockets Logo Post: Refinancing single family rental portfolio

Biggerpockets Logo Post: Heading to KC on 4/11/23; Looking to connect!!

Biggerpockets Logo Post: Regarding Mortgage Loan Credibility

Biggerpockets Logo Post: Is a DSCR possible for me?

Biggerpockets Logo Post: Cash out refinance on BRRRR

Biggerpockets Logo Post: Cheapest mortgage loan

Post: Mortgage Loans for an LLC

Post: Have a blessed Easter

Post: DSCR Loan Length

Post: Is it possible to get private funding of $1.3M as a new investor with poor credit?

Post: Refinancing single family rental portfolio

Post: Heading to KC on 4/11/23; Looking to connect!!

Post: Regarding Mortgage Loan Credibility

Post: Is a DSCR possible for me?

Post: Cash out refinance on BRRRR

Post: Cheapest mortgage loan