All Forum Posts by: Timothy Hero

Pre-Covid, buying down the rate made sense. In the DSCR space, every 1% you paid in origination, brought the rate down by half-a-percent (with most lenders). Now, every 1% origination moves the needle by 20-35 bps, depending on the lender.

Usually, the only folks paying extra points in this market are deals where cash flow is an issue and they need to buy down the rate for more LTV.

I've brokered 300 DSCR loans, and the rates you mentioned are no way real unless you're talking very reduced leverage (50% or so LTV). Right now, my rates are low 6's for a 5-year prepay, and those terms have kept me very busy, as I currently sit with 31 deals and just under $12 million in my pipeline.

If a lender is offering you those rates at a high leverage, the rest of the lenders wouldn't be in business, and the ones offering those rates wouldn't be for long, lol.

Few things to consider:

Is it non-warrantable? This determines instantly if a lender will touch it.

Another factor: STR financing is getting harder to come by (at least in the DSCR space). 25% of the industry used to lend on STR's, now it's less than 10%.

And it being a condo, expect anywhere from 15-25 bps added to the rate. Lenders don't like condos.

Most listings in today's world will be above $200k, and the ones at $200k or lower, good luck. You're going to have the worst of the worst tenants and the cash flow will be measly. Consider a profit of $150/month a good month for a deal under $200k in this market.

I'm a mortgage broker for DSCR loans, so maybe I'm biased, but I hate when the market blesses us with a 200 bps rate decrease in 6 months and folks want a larger blessing.

Keep in mind, just 12 months, 8% was the average DSCR rate. Now I'm quoting 6.2 - 6.4% on average.

Take the blessing. Get a reduced prepay in case the market does goes lower to protect yourself.

As mentioned in a previous comment, you don't want a cheap appraisal/inspection. It'll be done with little attention to detail and take longer for the report.

For 5+ units, it's normal for the price to jump, because it's technically and legally a different kind of property. It's silly, that a 4-unit for a DSCR loan can pay $650 for an appraisal, and a 5-unit in the same market jumps to $3k.

But that's how it is. The reports are often more detailed and require more analysis.

I think it depends on your situation and your goals. Some folks, assuming they have time and renovation experience, would use the $100k for a flip and leverage HML for the rest of the financing.

Others would use $100k down to buy a $400k property and call it a day.

It really depends on your goals and schedule.

No such thing as "easy money". There's "easier", but not easy. I recently was working on a purchase loan for a client. He was purchasing the property in turn key condition, for $190k. It appraised for $240k. Again, no rehab needed.

However, he had to spend time to learn how to find the properties like that. Again, easier, but not easy.

I recently heard that was a thing and I was mind blown, that in 2024, there's still folks with toilets that can't handle toilet paper.

My opinion, it's disgusting. There would a horrible odor, not to mention unpleasant to see.

Upgrade the toilet/plumbing, call it a day.

I just quoted a very similar deal at 6.3% with the same LTV and with 1% origination. 1.5 would probably be 6.15% or 6.2%.

DSCR, of course.

If it exist, it's usually on SFH under $180k, and at that point, the profit is so little, it's not worth the headache.

I have clients with portfolios of 15+ single families in this range, and to see them pocket $200-300/month is exhausting lol.

One maintenance request erases 6 months of cash flow.