All Forum Posts by: Timothy Hero

How liquid are you and willing to lend out?

Sometimes, raising your minimum and shaking out those investors is your best bet. I have a motto: "the smallest deals come with the biggest headaches and smallest pay days". My clients borrowing $500k have their stuff together. They know the process and don't complain over a $50 thing.

The $75k loan borrowers? 70% of the time come with headaches.

After that recent STR hike in fees, I expect less activity in the space. It'll still thrive, but Airbnb has already been more expensive than hotels for the last 2 years, and they just added to it.

I have lenders that'll do $75k, but you have to understand; the smaller the deal, the less profit. In the DSCR space, the average loan size is roughly $350k nationwide. It takes the same time for them to close that $350k deal compared to a $75k loan. It's better time and money on their investment.

Especially because in today's market, $100k properties are usually not in desirable areas.

I quoted a 55% LTV deal yesterday at 5.7%. I don't advertise those rates because most are seeking 70-75% LTV, so I don't want to do false marketing.

For max LTV, my lowest rate guys are around 6.5%.

For some odd reason, in the last 2 weeks, I've received like 15 quote request for manufactured homes. I usually receive that in a year. Sadly, none of my lenders offer them. I had one lender over a year ago offering them, but LTV was reduced by 10%.

Nearly 400 DSCR loans brokered. My lenders minimums are typically $100k, not $150k. Loans under $200k often get a .15 - .2% rate increase, but still a deal.

I've brokered nearly 400 DSCR loans. Here's what to expect:

5-Year step down is the standard prepay for DSCR, but you can adjust to the following:

3-year step down -- usually 15 - 20 bps higher on the rate

1-year -- usually around 40-50 bps higher on the rate compared to the 5Y

No prepay -- depends on the lender, but usually 50 - 75 bps higher than 5Y

3 year is the best option right now.

If it's over 4 units, the rate will be much higher than 1-4 unit deals right now. The 5+ market for note buyers is dramatically slow, to adjust for risk, lenders raise the rates.

Here's a quick scenario: I quoted a 75% LTV cash-out at 6.5%. That same lender quoted 7.8% for an 8-unit.

The 5+ unit market has been rocky the last 24 months. I broker DSCR and I don't even really market 5+ right now. Can I do them? Sure. I'm closing on one Wednesday. However, rates are higher and leverage is reduced. From my understanding, the secondary market where these loans are sold, there's not a large appetite for these right now.

Long story short, it's very unlikely you'll get what you're seeking for this asset class.

It's called a DSCR loan, and I've closed nearly 400 of them.

Lenders look at credit and the cash flow. Typically speaking, if the property is livable, not rural, cash flows, and you have decent credit, you're approved and since these aren't reported on credit, you can have unlimited.