All Forum Posts by: Tanner Lewis

Hey Ryan, 

Have a few contractors quote you on the repairs. Keep in mind that it will be difficult to finance this with a conventional or DSCR loan as they normally require the properties to be "turn-key" and you would most likely need to finance the deal with all cash or hard money.

You can also collect documentation on the repairs during your due diligence period, but I would suggest getting this done upfront before your earnest money deposit is at risk.

 For your first few deals, it definitely makes a lot of sense to go with an investor-friendly agent. You can connect with many under BiggerPocket's "Building Your Team". They can help you narrow down your target market and find something that makes sense with your numbers

If you qualify, the best way to step into the industry is to house hack with an FHA loan. These loans are often easier to qualify for and offer higher leverage than investor loans. As long as you are negative cash flowing less than what you would be paying in rent, it makes sense (this depends on your market; I am in Austin, and nothing here has positive cash flow). Of course, always try to get positive cash flow in your market if possible. You would use this investment to save more money so that you can buy your first investment property. I suggest going with conventional financing for these first loans as long as you qualify, and then when you start reaching barriers, look into investor-friendly loan products to fund future deals. For your second and third deals, it makes the most sense to go with a strategy with higher cash flow, but there are many strategies out there, so it depends on what you are most educated in.

Hey Myryah, is the short-term rental in a rural or suburban or rural area? More DSCR lenders do suburban STRs, but some can do rural as well, the best lender for you would really depend on the property details and your long term investing strategy.

Hey Quan, I've worked with Chalet before and they are a really good resource for setting you up with a team in a new STR target market. One of the realtors I talked to for a deal in Clearwater was an investor herself with 10+ STRs in Clearwater and knew the STR law street by street. Highly suggest looking into them

With DSCR lending, the income would mainly qualify you for the loan and give you a better rate on it, but it would not affect the valuation of the property. Anything 5+ units is valued on the NOI and cap rate (typically), so it would apply if you turned the property into five units with two beds each. Still, you would only be able to qualify with a twelve-month booking history.

In short, unless you plan to do some significant rehab and hold it for another year, I doubt you could increase the valuation with the high revenue. There may be some commercial products that can value the SFR off the NOI and cap rate, but I am not aware of any on the market.

Are you looking for a crowd sourcing investment? Or are you looking to take out a loan?

Hey Joe, 

The first line of defense is a good insurance policy. The second is a good entity structure, I would have a lawyer set one up but I personally like to see the following:

Investment property -> LLC in the same state -> LLC/land trust in Wyoming

In order to account for the cost/risk of your rental payment, I would measure it based on ($ cash flow)/($ rent). Meaning you mathematically adjust for the higher overhead costs; if you have a bigger rent payment due at the beginning of the month, then you need to be making more cash flow to accommodate the additional risk.

Hey Bryan, 

A lot really plays into the valuation and listing prices for properties: bed/bath count plays into it for sure, but also appraised condition, neighborhood location, neighborhood class, expected rental income, etc. 

Instead of comparing beds/bath counts to listing price, I would instead figure out a good metric to measure progress with. Some people use the rent/price ratio, cash on cash return, annualized ROI, etc. I would look at a variety of ratios and make sure they meet your buy box to determine if it is a good deal.

*another point to mention is that the beds and baths could be appraised as below grade, making the appraised value equal to the 3 bed/2 bath