All Forum Posts by: Mark S.

@Stephanie P., so essentially if I have 4 loan slots open now, after a new DSCR loan, I still only have 4 slots. And now that they're all (the rentals) under the DSCR loan, it's even more difficult to implement the strategy you're describing with equity repositioning to pay off higher equity/lower LTV properties. I should expect that the 5 rentals covered by the new DSCR loan are now even more "permanent" in terms of not refinancing again later/ever.

So what it seems to come down to is whether or not to do the DSCR loan for other reasons (pull equity out for reinvestment, lower interest rate, etc.), but that re-opening loan slots isn't one of them (even when certain DSCR lenders are quick to tell me that my existing conventional Fannie/Freddie loans will no longer show on my credit report). It sounds like while technically it's true that they may not show on my credit report, that when underwriting for the next new purchase using a conventional Fannie/Freddie backed loan digs deeper, they will still count these 5 properties as financed and the new DSCR loan really didn't help me in that regard.

Am I following what you’re saying?

@Nick Belsky, thanks for the quick response. I get that DSCR loan doesn't count towards Fannie/Freddie. My question is when that DSCR loan pays off 5 Fannie/Freddie backed loans (so homes aren't free and clear, they just no longer have Fannie/Freddie backed loans on them), does this DSCR loan OPEN BACK UP 5 of my Fannie/Freddie loan slots?

I'm considering a few DSCR lenders. I've narrowed it down to about 3. Conventus is one of them. I'm wondering if anyone has any experience working with them. Online reviews seem pretty good for the most part from a customer standpoint. Employee reviews about culture/working there on Glassdoor seem overall very bad having not so great things to say about management/CEO/etc. I did read a few posts on here about someone extremely angry about the servicer they supposedly use, Shellpoint.

They have been extremely communicative and responsive thus far in the early stages of agreeing to terms on the loan and seem very “eager to win this loan” and “win my business.”  While I appreciate their responsiveness on the one hand, the repeated phone call, followed by a text, followed by an email seems a bit much at times.  I even got an email from the CEO last night sort of randomly after speaking with someone at Conventus, telling me he started the firm 6 years ago, and expressing how he really wants to “win this loan.”  Again, I can appreciate it on the one hand but on the other hand, he almost sounds too excited and the whole “win this loan” thing seems a bit cheesy.  

Trying to look beyond the initial sales side of things that I’m experiencing now, I’m wondering what my experience with them might look like going through the process and beyond.  I would imagine it’s very transactional in nature like most loans, and ultimately my satisfaction (or not) will rest not with them, but with the servicer. Should I be looking more closely at the servicer?

Does anyone else find it a little odd how “hungry” they are?  Or should I just appreciate that a lender even picks up the phone in this environment because everyone is so busy?  Just trying to put things in perspective.  Thanks. 

Not sure why this is such a difficult question. I've heard different things from different people. I've spoken with both DSCR lenders and conventional lenders. No one seems 100% sure. I've heard everything from yes, no, I don't know, and here, read these guidelines.

I have 6 conventional Fannie/Freddie backed loans: 1 on primary, 5 on single family rentals. This takes up 6 of the 10 allowed conventional loan slots, leaving me 4 loan slots for Fannie/Freddie backed loans. If I do a DSCR loan for the 5 rentals and in the process the 5 Fannie/Freddie backed rental loans are paid off, how many conventional Fannie/Freddie loan slots do I now have? 9? Still 4?

Some say it is based on loans. Some say it is based of financed properties (does a DSCR loan count then because those properties are technically still financed - only now by a DSCR loan instead?)?

Does anyone have a definitive, absolute answer on how this works?  

@Trey Perdue What are the details on the property (BR/BA, sq fr, original build year, etc.)?   What zipcode are you in?  What are you getting for rent?  I have several with MSHB and curious.  

Good point,@Matt Devincenzo. I thought (and surprisingly was told by at least one DSCR lender) otherwise.

@Caroline Gerardo, I'm trying to follow along with your post but am getting lost at certain points.  Let me take it one portion at a time.

Yes, cash out non-owner loans seem expensive right now in upfront fees/costs.  Long-term interest rates seem okay.  

You are correct on the selling of one property.  I'm not planning to do that, but good point.  The lenders I've spoken with so far are very upfront about prepay penalties (generally 3-5 years).

Great question about insurance.  I would imagine I would simply need to provide proof of insurance on each property and could likely keep the same insurance in place that I have now.  Why would that change?

I'm okay if the HELOC gets closed. To my knowledge, there is no demand feature. I would only use it for investment purposes, so if the money is already out, it's out. If they shut the line down before it's tapped, I can still eat tomorrow.

The HELOC I plan to use is up to 10 years interest only followed by 20 years principal and interest. Not sure where you're getting 15 years. Max rate is 15%. They can only hike it up to 2% per year. There is a fixed rate lock feature that can be used up to 3x during life of HELOC that locks in at 50 bps higher than current variable rate. Variable rate is PRIME minus 0.51% with a 3.50% floor. If rates start to tick up and I have a large outstanding balance, I can simply lock the line at a fixed rate 0.50% higher than the then current variable rate - no big deal. No annual fees. No closing costs (promo). I agree with what you said about interest tracing and recordkeeping - already doing that.

Am I understanding correctly that you are saying to poke the servicer and ask them for an exception on my existing loans for the quitclaim to LLC that already happened? Why would I do that? Chances are I'm unnecessarily raising a red flag and they're likely to say no anyway. And if I go the DSCR route, this becomes a moot point.

The LLC is listed as an additional insured. Both my "blue head" personal name and LLC name are listed on the policy. If there's a claim, they will pay the claim. Again, not an issue if I go the DSCR route.

@Howard Montaque, this is awesome.  Thanks so much for posting this.  Just pounded the phones to several on the list and hoping to settle on one soon.

Goal: Restructure existing debt, keep payment around the same, pull cash out for reinvestment purposes (thereby increasing LTV).

How: DSCR loan / portfolio loan. Open to other ideas here, too.

Current Situation: I have 5 SFRs in Memphis, TN, each on 30-yr fixed rate loans.  Weighted average interest rate is right at 5.00%.  Purchased these turnkey properties initially with 20% down (and got these loans) in personal name, had title company quitclaim to SMLLC.  Let's save the due-on-sale for another discussion.  As we all know, we're experiencing quite a bit of price appreciation (even in markets like Memphis, which aren't historically known for it).  I'm considering restructuring the debt on these rentals and pulling some cash out.  

My local credit union that I have a relationship with (and do my business banking with) does not lend on property outside of KY. I've been in contact with a couple of commercial brokers from BP and they have some interesting products, including 30-year fixed loans with similar/lower interest rates to what I have (depending on LTV, etc.). I could potentially kill all the conventional 30-year fixed Fannie/Freddie backed loans and wrap it all into one DSCR loan or portfolio loan made to my SMLLC. Seems like a no brainer, but I'm finding the fees/costs for these loans seem quite high (in the five figure range - like $10K-$15K).

Depending on the LTV, I could probably get anywhere from $50K to $100K out (wide range, I know). Total loan size would be in the $350K-$450K range. With one lender, the fees don't change (need to check with the other one - waiting on a rate sheet from them). My total PITI payment would be +/- a few hundred per month depending on which route I go. These funds would likely be reinvested into a self-storage/mobile home park fund.

As a side note, I am also in the process of getting a HELOC on my primary where I could likely get about $65K-$70K (promotion w $0 closing costs, variable rate right now at 3.50%). This seems like the cheapest cost of capital by far, however, it doesn't really address the built up equity issue with the rentals (my SFR portfolio is sitting at about 55% LTV right now, and I'd like to see that higher).

Bottom Line: I have excellent credit, strong income, and am very "bankable."  From what I told, many people that get these types of loans are either "Fannie/Freddie'd out" or they don't have much (if any) documentable income (and therefore the fees are quite a bit higher).  I'm trying to figure out whether or not it makes sense for me to move forward with one of these products.  Am I crazy to do it...or am I crazy NOT to do it...?  Just feels a bit silly to pay $10-$15K to "get" $50K-$100K when I don't "need" it necessarily.  I've always heard your 30-year fixed Fannie/Freddie loans are like gold, but these DSCR loans seem competitive from an interest rate/term standpoint.

Downsides: The only potential downsides that I'm aware of besides the fees are that if I ever wanted to sell just 1 or 2 properties, when those sales close, the proceeds go towards the outstanding principal balance on the loan (I don't get the cash).  There's also a prepayment penalty for the first few years (which doesn't really bother me as these are intended for long-term buy and holds).  I'm sure I might be missing something here, not sure...?

Positives: On a positive note, doing this would free up 5 conventional loan slots for future acquisitions. My interest rate would be lower (likely around 4.375% to upper 4s depending on LTV). I'd have more cash NOW to reinvest. I would increase the LTV on the portfolio and keep that money working. Once completed, everything would be in the name of the SMLLC (properties, loan, etc.).

Sidenote: I did talk to my residential lender about a possible refinance.  He quoted $3,300 to refinance ONE property, 0.50% lower rate, cash out.  So, on a relative basis, maybe $10-15K isn't so bad considering if I did them all individually, I'd be paying around $16.5K.  

What do you guys think?  What am I not considering?  What other info might you need to share your thoughts?  Thanks in advance.

@Curt Smith, just send you a PM