Speaker 2 0:00

Welcome back to the Philly Landlord Guy, the show where we give you real, practical, no-fluff information on owning and investing in rental property in Philadelphia. I'm your host, Yuriy Skripnichenko, the guy with the impossible last name. I'm licensed real estate broker and certified property manager here in the city. Today, I have a guest for the episode, and I have someone who brings a perspective that is generally rare in this industry. Someone who has spent nearly two decades on the operations side of property management, led one of the largest residential property management companies in the Mid-Atlantic region, and served as the national president of the National Association of Residential Property Manager. And now he's sitting on the lending side of the table at one of the country's leading private real estate lenders. And without further ado, let's j-jump right into it

Yuriy 0:55

hi, Tim. Welcome to the podcast. Glad to have you here. I've been waiting for it for some time for you to join. Can you tell us or for our Philly landlords who you are and what we need to know about you?

Speaker 1:10

Yeah. Thanks, Yuriy. Happy to be here. Really excited to, to have a conversation today. Yeah my current role is I'm the director of partnerships for property managers at LendingOne. We are a private lending company that focuses solely on investment property lending and financing. We will only give money to folks who are buying rental investment properties and focus really on the single-family space. We'll do up to four units, but it's really one to four units that we focus in. So my role is to go and meet property managers and sign them up as partners, but my background is actually in property management itself. So I ran a company called Dodson Property Management, and I was a partner in that firm as well. We had offices in Northern Virginia, Central Virginia, Williamsburg, Virginia, and then we had one in Sarasota, Florida. We did single-family property management. We did small multifamily property management, large multifamily property management, and then commercial and HOA management as well. We managed about... By the end, we managed about 8,500 total single-family and multifamily doors, and then 17,000 HOA units as well. So I did that for about 16 years, 17 years. And so yeah, I've got a long background in property management. I've done everything from being a receptionist, to property manager, to senior property manager, to being the COO of the company as well. I've done it all in the property management space, so to speak.

Speaker 2 2:36

That sounds like a lot. And some, one part that I think you're missed in saying that you were NARPM national president in 2023, and that's how we know each other. We met through NARPM a few years back. But for landlords who do not know what NARPM is and why it matters can you tell them a little bit more about that?

Speaker 2:57

Sure, yeah. Great call out there. Yes, Yuriy I knew you from my my RVP days on the NARPM board. I spent, I think, eight years on the NARPM national board of directors. I also helped start our local Richmond chapter. I helped run our state conference in Virginia, and I think I met you, I think, at the... We did a Pennsylvania kind of state meeting together. That was the first time we met. It was great. But yeah, I also served as the 2023 national president, which was one of the highlights of my life. It was a little more travel than than my wife liked with two young kids, but it was great. And NARPM is really important because I think it really elevates our professional status for our businesses as property managers. It also makes sure that we're held to a higher standard for our clients and our tenants as well. Landlords out there, if you're not using a NARPM property manager, then you might have somebody up the street that's just not that, that they're not held to any standards, right? And I think NARPM's a really fantastic way for property managers to network, understand that, hey, this is a difficult business, but it's not impossible as long as you're taking care of human beings. And then NARPM on the other side i- is really working hard as a national organization moving forward to try to advocate for landlords and try to advocate for property managers, and property managers and landlords' property rights, right? I think we've got a lot of, we've got a lot of stuff going on at the legisla- legislative level- That is really gonna have an impact for, on us long term. I know that it's currently there's a lot of state by state laws and different things that get passed different places, but if we start getting, a lot of federal traction with the way they're talking about some of these things, there's gonna need to be a source to really advocate for landlords and property managers. And NARPM, we just switched our mission and vision a little bit around and to make sure that advocacy is called out in that, and NARPM's been doing a really good job. They just passed a bill in the House with bipartisan support last year. They've made a lot of headway in some Florida legislature issues. And so yeah, it's a... that to me are the two great things is like the professionalism, the community, and then the advocacy that, that NARPM provides. Yeah.

Speaker 2 5:01

Yeah, and it's not only on national level. We in Philly have so much crap coming out of our city council, and we have this lawsuit that landlords filing against them because of the way how they hold their meetings and how they're not accessible to everyone or maybe because behind the closed doors. And NARPM was able to contribute to that, to help landlords with that action. So grateful for that and great to have organization nar- like NARPM.

Speaker 5:31

Yeah, I- like I said, I think it's just gonna be a huge piece of the puzzle moving forward. There's gonna be a lot of tenants rights folks out there. There's gonna be a lot of landlord rights a- rights fo- folks out there. And just, some stuff does need to be legislated, right? And we do need to have common sense regulations around things. Not everything obviously, but I think if NARPM can be the leading voice in that as they're trying to become they can be really powerful. And like you said, it's powerful now. Florida, we've done a bunch of stuff in Florida. We've done a bunch of stuff in Oregon. We've done a bunch of stuff all over the place. So it's it's really important, I think, for our industry and just landlord rights in general.

Speaker 2 6:05

Unfortunately the more I am in this business, the more I deal with people and landlords and tenants, and I see that common sense is not that common as you would think it would.

Speaker 6:16

At Dodson, we always used to say, "This would be a really easy business if it wasn't for tenants, landlords, em- and employees." If you didn't have to- Yeah if you didn't have to deal with any of the people, you'd be great, right?

Speaker 2 6:26

Yep. Yep. Okay switching the gears here. You said you were managing about 8,500 units, I think by the end of all of this across- Yeah different states and different cities. From that high perspective what do you think is the most common mistake that small landlords make that cost them a lot of money?

Speaker 6:48

Yeah. I think two, two things come to mind, Yuriy. One is deferring maintenance. I think that can just be really detrimental. I know it's hard. I've... I'm an investor myself. I've got properties, and the last thing you want is an unexpected bill to hit for, gosh, you gotta do an HVAC replacement and suddenly you're like, "Wow, that's 13 grand." Or a roof leak happens and it's... Even if it's just a $600 repair and you're just not in position to do it that month. The more you delay, the worse your property condition gets, the more angrier your tenant gets, the less likely they are to renew. So I just think there's this pattern of okay, suddenly my asset is depreciating and it's not actually looking good. And so I've got a tenant that hates me and moves out, and suddenly I can't rent it for as much or I don't have, I don't have the 15,000 then to totally turn it because they left it in bad shape because they were mad at me because I didn't fix the leaky roof that had been leaking for a year and a half, right? So I think that's a really big one that people don't think about as costing them money in the long term. But I think if you're pushing maintenance down the line, it's gonna cost you in asset value and it's gonna cost you in tenant value when your tenant finally moves out The second one I see, I think really i- is maybe a little bit more straightforward, but I see especially private landlords a lot of times they have a great tenant. They love it. It's been a long-term tenant, and they just don't, they don't increase their rents the way that they're supposed to increase their rents, right? Suddenly you have a tenant that's been in there and they're 300 behi- $300 a month behind market value. I have... I will admit, I have one of those in one of my rentals right now. And it's a house I bought like in 2011, and she was the only tenant I've ever had in there, and she's probably 300 bucks behind on market rent. She's great. She's wonderful. I love her, but every month I get that check and I'm like, "Man, I really regret not increasing her rents." It's... And it's so simple when you think about it. It's okay if she moves out, that's a problem. I've gotta turn the unit and, she's such a nice woman and sh- you know, she's got a special needs kid, wanna treat her right. My heart's in the right place, but at the end of the day, when you're giving up 300 bucks a month to market rent, that, that's not a great decision. But I do see... I... You see it so much. We used to take over properties left and right and we'd be like, "Wow, that is really under-rented." And the story was always she's a great, she's a great tenant. Love her. She's been there for a long time," or, "He's a great tenant. Love him. He's been there for a long time," or, "Oh, he does some maintenance or he does the yard and that's not part of the lease we cut him a deal." You just gotta figure out what market rent is and go with it or move on. Yeah. So th- those are the two for me, is the deferred maintenance and the not getting at market rent when you're when your lease is up for renewal or however it may be.

Speaker 2 9:33

And to that point, I think we have two complete opposite type of landlords. Somebody who doesn't want to increase because w- I have a great tenant and they've been staying there forever, and they've been paying me, or somebody on the other side that I want to increase a- and I want to have my 5, 10% increase, whatever it is. And in the market that we have right now, it's just not possible. You can increase it. Nobody keeps you from it, but you will lose your tenant. And if you're losing your tenant, then you have the turnover, and we all know that maintenance, it's not the cheapest part of the business right now.

Speaker 10:05

Yeah. It's a much, it's a much different- world that we're living in right now than we were 16, 18, 24 months ago when it was straight up, right? Yeah. Rents were going straight up. Property values were going straight up, and I think landlords probably got used to that, and I think that's okay, right?

Speaker 2 10:22

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Speaker 11:09

As landlords, we need to adjust our thinking, right? Y- just because you have an asset doesn't mean you deserve that it should go up 5 to 10% every year, right? And you should also just keep im- just be paying attention to the market, right? Be hyper-focused on what your market looks like. I don't live in Philly or the surrounding areas. I know it fairly well, but, Richmond, even the little micro markets that we have could just be totally different. So you really got to be paying attention as landlords and property managers to what those little micro markets are doing and how you can you push rents? Can you increase, right? If you do try to increase are you gonna lose your tenant? If you're a property manager and you try to get that increase and the tenant says they're leaving, are you gonna call them back and say, "Hey, what if we only increased it X percent?" Or whatever it is, right? Would you stick around? And so you got to have property managers who know what they're doing if you're a la- if you're if you're a landlord. And then as a landlord, you have to have reasonable expectations of what that performance looks like.

Speaker 2 12:05

Yeah. And on the maintenance part what did your best run properties have in common when it came to maintenance and vendor management back when you were managing them?

Speaker 12:16

Our best run properties were the ones that would let us do the work for them instead of having us do our, have their own handyman. So we had a model on the single family side where we would allow you to provide us a handyman, and we would use them if that's what you wanted. I know that's not super-duper common in the property management industry, but that's what we did. And inevitably, when somebody else had their maintenance person working, it was slower on the maintenance side. It ended up costing more, and the tenant was usually irked. So we actually had our list of vendors, and we had a few internal maintenance folks that we were able to use. We kept costs down. It was a money maker for us, but it was not a... We're not, we're not making 40% margins on it, right? If we were trying to make 10% margins on it, that was a good, that was good for us, right? We wanted to have aligned goals with our landlords, and so that was our goal there. So we were trying not to rip folks off, but if they let us handle it, if they let the professionals handle what they were supposed to be doing, those were the most well-run properties. And then I guess I'll go back to as well not deferring maintenance. When you have the opportunity to fix something, go ahead and fix it

Speaker 2 13:24

Okay. And if we're talking about property management, managing, your property and managing your maintenance and taking care of everything, at what point a small landlord should be thinking about giving their properties away to a management company instead of managing themselves?

Speaker 13:40

Yeah, it's a good question, Yuriy. And I'm gonna give you a terrible answer, is it depends, right? It really depends on what your goals are. For me, right now I only have seven units. That's down from... i've fluctuated in my life from 100 and some to, down to two, right? But I want those managed professionally right now because I'm on the lookout for finding new properties, right? If somebody only wants five properties and that's what they have, and they're able to manage it, then great. That's fine. I would still suggest probably using professional management just because of the constantly changing landscape that we were talking about, whether it be with the laws, with the regulations, with inspections or whatever it may be. I would still recommend going to a professional property manager if you've got one or five. But if you're used to it, if you know how to do it and you're staying in tune with what's going on locally, go for it. But if your goal is to expand, if your goal is to grow, right? If your goal is to get to 20, how are you gonna manage your properties and focus on that, right? I think you should have a really defined structure with how you wanna do that. And the way that it... The difficulty in finding deals these days is real, and so you gotta be spending the majority of your time right now trying to find deals. And to me It... Going back to it, it just depends on what your goals are. However I really th- suggest professional property management all the time. I know that it eats into your NOI as a, as an investor and a landlord, but it can save you a lot more money in the long run.

Speaker 2 15:15

Yeah. I agree. I, myself personally, before I got into property management, I had about five units when I was on my, at my breaking point that I... I, at that time, I had my full-time job, and I had my five units, and that was too much for me to deal with, and that's when I gave it out to a property management company.

Speaker 15:37

Yeah. I think that's, I think that's... Five is, would... If you're working a full-time job, five would be the breaking point, for sure. It's just... I know that sounds crazy, but it just is. I've got one right now. I just built a house, and it is driving me crazy. It's been on the market for about two weeks. But it it's taking... It's monopolizing my life. So I'm, I would love somebody else just to own it and get rid of it at this point. But yeah, it can be one that drives you crazy, right? Yeah. It can just be that one problem house. It can be two. It can be five. So I know I'm giving you a bad answer, but I think it... Just going back to think about what your goals are, and maybe your goal is to make as much possible money as you can right now, and maybe that's... So then maybe it's not time for a property manager. But maybe your goal is to get to 25 units or 75 units, and at that point, you gotta get a property manager because you're just gonna be spending so much time doing the other stuff that you're not gonna be able to figure, find deals or get deals done.

Speaker 2 16:32

As what we're saying, that we're seeing more and more this tenant-friendly legislation coming out in different markets, not just in Philadelphia, but even in states that usually more landlord-friendly than specifically Philly market.

Speaker 16:46

Yeah.

Speaker 2 16:47

How... and in Philly, we just recently, this year and last year, we passed quite a few ordinances that affect specifically how we do business as landlords, how we can screen our tenants, how we can terminate our lease. And now we have good cause eviction protection, not just for one or month-to-month lease, but any lease. And we have proactive inspections now that they will be rolling out instead of reactive. Now L&I is planning on inspecting every single unit. I do not know how they're going to do it for the city of Philadelphia, where are they gonna get the workforce to do it, but this is something that's on the books now. How do landlords usually come on top of the, this environment when it gets harder?

Speaker 17:36

You're asking how do they win basically when it gets harder? Yeah, one, you just really... One, just as we talked about, right? It is your job, Yuriy, as a property manager to... Or my job as a property manager to understand these laws and help landlords over- overcome the difficulties of them, right? You're gonna see a lot of people sell. You're gonna see a lot of people that say, "I'm not gonna deal with all this stuff." So think about it maybe as an opportunity to buy more properties, to get into some different areas. But yeah, I would say make sure you have a good property manager on staff, make sure you have a good attorney in your back pocket, and make sure you have a good real estate agent that can sell or buy for you really quickly. Because, the landscape is always gonna change, whether it's get, gets more ten- tenant friendly, gets more landlord friendly, there's always gonna be something changing, right? So you have to build your team out to be flexible, and you have to have... Manage your own expectations, right? And I would even go back to just starting with the deal, right? When you're think- when you're looking at a deal, is it a real- is it a deal that can withstand changes, right? Are you just buying something just to buy something 'cause you're bored and you need to put cash somewhere, right? Or are you making a stretch on what you're looking at? And just don't do it, right? Find the right deal for yourself. Put the right amount of money into the deal and set yourself up for success at the start. As most people know, success in real estate y- you make your money on the front end, on the acquisition, right? I would just make sure you're continuing to stay diligent to that despite the marketplace right now being a difficult one to find deals in.

Speaker 2 19:18

So talking on the acquisition or about acquisitions if you were a Philadelphia landlord yourself sitting on two or three properties right now and possibly looking to grow your portfolio, what would your strategy look like for 2026?

Speaker 19:36

I'm not a Philadelphia landlord, but I can tell you what my strategy is here in the Richmond area. Yeah I can tell you w- one of my partners and I, we just refinanced a couple properties that we have had for a while. I wanted to... Like everybody I'm on BiggerPockets, I'm looking at I'm reading all these things and saying, "Okay, I'm just gonna BRRRR. I'm gonna, I'm gonna BRRRR some properties," right? I'm gonna find a bunch of deals and they're gonna be right in Richmond. I'll be able to find some value add stuff. It's really difficult. It's still really difficult. So my biggest thing is I'm actually expanding my footprint in what I'm looking at. I'm looking at deals in secondary markets like in North Carolina, which are only a couple hours away. And I'm on some different websites where you know, the... Whoever holds the deals right now is gonna win over the next year and a half, two, three years. You've got a lot of different companies like rebuild.com and some other folks trying to get off-market deals in front of investors. So I'm exploring those sorts of places to try to find some value add properties, right? 'Cause I wanna do a value add. That's what I enjoy. I like renovating properties. So that's always gonna be my strategy, but the strategy is changing in the fact that I'm expanding my footprint of where I'm willing to go. And what that means is I've also had to do a lot of legwork on the front end and saying Do I know somebody in Asheville, North Carolina, where they'll be able to help me do some value add? Do I have a team here that can go there? Can I look in Greensboro, North Carolina?" Again, markets that are close, closer to Richmond for me. So the, those are within three hours of me. So- Really just looking at expanding my footprint and not just saying, "Okay, I'm gonna try to find something right down the road." 'Cause the MLS doesn't have deals on it that, that is, that are worth my time, quite frankly. So ex- figuring out how different, how to get a little bit different, right? Not outside of my regular strategy, but just a little bit different. So expanding my footprint a little bit. I've reached out to a couple of more real estate agents, trying to get them to try to find me those deals so that I can try to find some off-market deals. But then again, like I said, like a rebuilt.com is one that I, that Lending One, full disclosure, Lending One is partners with them. But that, that, that is a great tool for folks who are wanting to look for properties So it might not be to equate that to Philadelphia. Maybe you're used to, to being in Philadelphia proper, right? Maybe you're used to investing in one micro market in Philadelphia proper, but maybe you expand 10 miles west, where you've never looked 10 miles west. Maybe it's 10 miles north. Maybe it's, maybe you're just into Wilmington, Delaware, or whatever it is now that you're willing to look at. But I think just maybe being a little bit more flexible with what your typical buy box is. Now, don't go outside what your numbers make them look like, but you might have to find expanding outside of your comfort zone in terms of geography.

Speaker 2 22:33

We have a lot of, Not this year, but the past couple years, we had a lot of influx of out-of-state landlords who would come- Oh, yeah and they buy renovate, basically do BRRRR method. And they would find some kind of guru online who teach them how to do it, how to buy, and how to flip or renovate and rent it in Philly. And the model is usually find something super cheap put, I don't know, 50, 60 grand into it-

Speaker 23:01

Yep

Speaker 2 23:02

and rent it out for $2,000, which never works. Which never works. Literally

Speaker 23:06

it

Speaker 2 23:07

doesn't work. There is not a single spot in this city where you can buy a cheap property, put 50, 60 grand rent, and rent it for $2,000. It just doesn't exist. But people do take those courses. They do read BiggerPockets or listen to podcasts like that, and then it's in their head that they can do it. And they- Yeah they try doing that, and it just doesn't work. The numbers do not work. They underwater, or they cannot pay for the lender, whatever they use, because the rent is so cheap compared to what they were planning. Or what we see happening pretty often is that they go and buy this old row house, and they do not do proper renovation. They just do cosmetic lipstick. They put new kitchen cabinets, like new tile, new bathroom, but they don't do anything behind the walls because who cares? It looks beautiful, right? But when what I call it, people start actively living in that property, then you start figuring out that nothing works. That the wiring is old. Nothing w- is working. You have a leak in every single room. You have problems everywhere. So that being said how, or, With people like that, people who are trying to invest, and yourself as well, what kind of- financing are you using and how do you underwrite the deal to make sure that not on the financing side, but as a landlord or as an investor, how you, how do you u- underwrite your deal to make sure that it actually makes sense?

Speaker 24:42

Yeah. It's a good question. So again, I'm a little biased. I work for a lender, so I'm actually using... And that's actually how I found out about LendingOne is I started using LendingOne as an investor. And I started using DSCR loans as a way to to try to make deals work. I didn't know what they were before I started with LendingOne and started talking with LendingOne. But so yeah again, I'm just f- fully disclosure I'm biased, but I'm using LendingOne 100%. We- we'll finance 100% of your rehab costs, so that's a no-brainer, right? So up to 92.5% of your loan to loan to cost, which is your acquisition in there, and everything in between. So typically I- I'm going straight to LendingOne and saying, "Hey, can I get some money?" Right? "Can I do this?" In fact the properties we just refinanced, I refinanced with LendingOne out of a local bank. It was just good timing because the local bank was my five-year ARM was maturing and they were gonna blow up my interest rate, and so it just worked out. But yeah, so LendingOne does DSCR loans, which are debt service coverage ratio loans. We've got a couple of different products there. Thir- they're 30 years amortized, or we also have a 10-year interest-only product, which does help people with cashflow upfront, right? So I'm looking at both of those options. Again, with the value add as well, I'm trying to acquire the property, finance all of the ac- the renovations, excuse me, and then roll it right into a DSCR, a 30-year DSCR loan. We save... You can save a bunch of money with us with origination fees and bips off your rate as well if you do it that way. So that's kinda my plan in terms of financing. LendingOne's a great option, folks, if you're listening. We'd love to talk to you, but there's also a ton of other private lenders out there. You should always have a hard money person, a private lender, and a local bank that you can go to in a jiffy and say, "Hey, here's a deal that I'm looking at. Can you help me?" I'm not gonna, I'm not gonna forever do LendingOne loans. Right now they seem to be a great option with our interest rates, you term- you asked in terms of underwriting my deals as well. I literally have... I do a couple of things. LendingOne ha- we give all of our partners the, a deal calculator. That's where I start. I do that, and I just make sure that it kinda fits in the DSCR model. And then I do a couple things. I go straight to my cap rate spreadsheet, which I built 15 years ago, right? Which is gonna tell me, is it a good deal? So I'll just run right through it. I'm always super conservative with my numbers. I try to pull the all the real numbers that I can, but then I'll just plug that in and say, "Okay, is this cap rate within what it should be trading for? If not, can I trade or can I change the the acquisition amount or the market value of the property to make it worthwhile?" If it graduates from that, then I'll really do a deep dive on a budget and go visit the property and try to try to really look into, hey, is this worth my time to, to renovate, and can I get the ARV that I think I can out of it by, and by walking it? But that's really it. Like I said, I use my deal calculator to make sure it fits into a DS- DSCR loan, and then I go right into my cap rate. And if it fits within the cap rate, then I'm gonna go take a look at it

Speaker 2 27:49

To that point actually on our website at trustartrealty.com, we built those calculators. So anybody who wants to use they free to use. You can just go plug in your numbers, put your property address. If it's in Philadelphia, I think it automatically pulls out your OP da- data. It will pull the taxes everything that we know or that publicly is available in the city of Philadelphia will automatically get into your form, and you can see all the numbers calculated for you. You just need to put some information in it. But Tim, as you mentioned, that you didn't really know what D- DSCR loans were before you got into lending one.

Speaker 28:25

Yeah.

Speaker 2 28:25

And I'm sure it's a common term. People hear it here and there, but a lot of people still do not fully understand it. Can you simply break it down for us? What is it and why it exists?

Speaker 28:37

Yeah. So it... Honestly, it's really simple. If you're an investor, you've ever bought a home, I- I'll explain it by comparing it to what people are used to, Yuriy. People are used to what is called a DTI loan, which is a debt-to-income ratio loan, right? So I'm going to a bank, I'm gonna go buy a personal residence or a rental property. They're gonna ask for W-2s. They're gonna ask for couple years of taxes. They're gonna ask for your sister's tax returns, right? They're gonna ask you for a ton of paperwork to make sure that your ability to pa- pay that loan back exists, right? So me as a person, me as a human being, can I pay that loan back based on my income, based on what other debt I have, whether it be another mortgage or a car payment or whatever it may be. And so they use a ratio where they're dividing your monthly gross income by your debt, and they say, "Okay, can w- do we think this person can pay back their rent?" They then put it on your personal credit. There's probably gonna be limits on that, right? If you go to your local bank, they're not gonna loan you on 10 different properties because their threshold for risk in that regard is not that high. So that's a DTI loan, a very great tool for folks, right? If you're gonna buy one rental property, I suggest you, you look into that option, right? For a DSCR loan, it's a little bit of a different equation. So that's a debt service coverage ratio loan, where we're looking at a business entity and its ability to cover the debt. And so we're not looking at Tim or Yuriy to be able to cover the debt, we're looking at the business, and in the sense of DSCR loans for rental properties, the business is the asset, right? The rental property. So very simply, if your rental property rents for $1,500, or you said $2,000 is what people wanna try to rent their stuff from. If your rental property rents for $2,000 and your principal interest, taxes and insurance is $1,998, then lending one and other private lenders will lend to you because your coverage ratio 2,000 to 1998, you win, right? Depending on your experience, where the property is and a couple other factor and your credit score, we can get down to 1.0x the ratio. So like I said, if it's $2,000 and it's 1999, we can still lend on that. So it's just a useful tool that's a little bit different than the DTI loan, and it's focused really for investors, right? There's no limit on how many you can do if, as long as the, as long as you're acquiring rental properties that are going to cover the debt, we will lend to you in that entity. There's also no there's no credit requirements. Or excuse me, there's no credit reporting. There is a credit re- requirement, however, depending on where your credit score is, just the rate fluctuates, right? So we'll still underwrite you if you're a 640 or above, we'll still write a loan for you. But there's no income requirement either, right? So Yuriy, you could make $0 and 0 cents last year. You could just be getting into real estate investing, and we would still loan to you. So I hope I answered that question. I know that was a little long-winded, but I wanted to make sure that it was clear in the comparison between the two things. Both are good products, but DSCR loans look at the business entity, and we will only lend in an entity's name versus a DTI loan that is basically saying, "Hey can Yuriy pay this rent back?"

Speaker 2 32:10

Yeah. And to add to that some personal story here. Most recent personal story in lending world. I've been using DSCR loans for a while, and usually I either do commercial or DSCR. I rarely do anything in my personal name or do any financing in my personal name. Everything goes through business. But recently I was renewing my line, business line of credit with my local bank, and they told me like, "Hey, Yuriy, we have this new product for rental properties that you can get line of credit or HELOC. Basically, it's a HELOC, but for your rental properties specifically. Yep. And my first two rental properties that I ever bought, I still own them. They are in my personal name just because I didn't know better when I started. Sure. And they were or they are fully paid and free and clear, so I was like, "Sure, yeah. Let's do this." And that's not DSCR product. It's just the regular market, regular loan that will be on my credit. I was like, it never hurts to have a extra line of credit, so I submitted application end of February this year. I closed on these loans last week

Speaker 33:27

Oh, boy.

Speaker 2 33:29

June 15th.

Speaker 33:30

Yep.

Speaker 2 33:31

I have never, through my investment and property management and any real estate career, had to provide so much information about myself. I was telling them, "You literally know about me more than I do." They ask for so many things, and also the problem is when you're applying for a loan like that, people who collect your documents, they don't really know what they are. They just have check marks that, "Okay, we got this, we need this." And they kept asking for the same thing over and over again.

Speaker 34:05

Over and over again? Yeah.

Speaker 2 34:06

They asked me for every single mortgage note on every single property that I owe And I, like where do I get it? I don't even know where to find them. Yeah. I have many properties. I it just took me a while to come up with all the paperwork that they need, but also they would not understand a lot of this because most of it- was commercial lending.

Speaker 34:29

Yeah.

Speaker 2 34:30

And it just wouldn't click in their mind how it works, why it's here, why it's not here, why it's not reported on my credit, why it's not in my tax report, or why it's not in this company but in that company. And one of the problems that I had that was actually was a loan that I had with LendingOne. Because it was serviced by, yes, the loan is with LendingOne, but the service company is a different service company. They requested a statement from every single mortgage as well that I have. So they saw the statement with one name, but the note was a different name, and they kept asking me to provide them a letter of my mortgage sale from one entity to another entity.

Speaker 35:11

Right.

Speaker 2 35:12

So that, that was super frustrating and a long process. I was so upset with them. I have a good relationship with this bank for many years, and I personally know the branch manager. But I literally... And I'm usually a super calm person, but I almost yelled at them just because it was incredibly complicated to do all of that. And I feel pain of regular people who just go and get regular mortgages or line of credits, how complicated it is to get that compared to some commercial or DSCR product. So something that, Tim, you did not mention, that the time to close on a loan like this, it doesn't take you six months or five months or whatever it is. No. You can close quick, and you do not need to provide everything about you that you don't even know yourself.

Speaker 36:02

Correct. Yep.

Speaker 2 36:03

It's just a much, much easier process to do that.

Speaker 36:05

Yeah. Thanks for that call-out, Yuriy. Yeah. We, One of our, one of our core values at LendingOne is speed and ease, and we're not gonna be as fast as your local hard money lender who is gonna charge you a lot more points than we are and that your interest rate's gonna be higher, but they show up. You call them on Friday, and then they show up on Saturday with a bag of money, right? We're not gonna be quite that fast, but we can close loans in 7 days, 14 days. We get things done pretty quickly and it is not, It is not like having some sort of a surgical procedure. It can be quick and you you just provide us an r- we do a credit check. We, you provide us your real estate schedule, and, if there's anything strange about your real estate stuff, we might ask you a question. I've got a Section 8 tenant that's a weird situation, and so we had to get a little bit of extra paperwork on that. But it's not asking for all that sort of stuff on where your mortgage is and all that stuff. It's, we try to get loans closed, not figure out ways how to not get loans closed.

Speaker 2 37:01

Yeah. So talking about the fees and different pricing structure rates right now are high, right? We're seeing high six, maybe low seven right now, Yeah depending on LTV and your credit score, of course, and the deal itself. So how do investors make- new acquisitions pencil out now with the rates like that compared to what we saw three, four years ago?

Speaker 37:28

Yeah, it's hard. I think you just really gotta get creative. You gotta think about different o- financing options. Like I said, we've got a couple of 10-year interest-only products that are still amortized over 30 years or over the last 20 then. Yeah, I, it, you just gotta... You have to have a ton of time looking at different deals 'cause it's not... There's nothing I can do to change the numbers, right? There's nothing landlords can do to change the numbers, but if you're a real estate investor, you need to buy properties, right? Look at things like owner financing potentially, right? If so- if you have somebody who you know or who is a a person out there that you meet a- and you hit them with a letter or you hit them with a cold call or something like that, obviously owner financing is an option. Sometimes those, you can get those rates a little bit further down. You c- might be able to get a, some of the actual price down on the property if you do that. But you just really gotta get creative with different financing options. Like I said for me it's probably that 10-year interest-only loan, and then also just getting creative with what your strategy is, right? Maybe you just are a buy-and-hold person and you've never done a flip before. A flip comes your way, you gotta take a peek at it, right? Be willing to be, to adjust a little bit of your strategy here and there. I'm not a new construction guy, but this deal came by my way and built a new house. Just it, the numbers made sense and I w- I was flexible on what I wanted to do. I had a little bit of that experience in some other spaces. And so I think again, you just gotta really be flexible and be open to- Yeah to, to different options. What are you looking at differently?

Speaker 2 39:02

I'm buy-and-hold guy, and I always say that I never sell, I buy. Yeah. And but again, with the weird market that we've been seeing for the last year and a half last year I had a deal that I was very excited about, which I think I did with LendingOne as well. But during the deal I realized that it would not make much sense to have it as, or to hold it, just because it turned out to be in a area that was way more expensive than a regular hold for me. And, Yeah the renovation that I've done to it was quite nice, and just the price that I could sell it for versus what I could rent it for didn't really sit well with me, so I decided to sell it.

Speaker 39:46

Yeah.

Speaker 2 39:47

And I do not know if I would do that again. I was very upset when I was doing my taxes this year after selling that property, and that was my one and only flip that I've ev- ever done. Yeah. I don't really wanna do it again. But to your point you need to be flexible, and you need to know when deal works or when it doesn't work, even if you need to sell it, if you buy and hold, or the other way around, if you want to sell, but if you need to hold it for a few years. Yeah. That might make sense. And also I see that a lot of people have a lot of equity sitting in properties that they've bought years ago, or maybe they got through family or whichever other way that are free and clear. Are they able to use DSCR loans to cash out, just basically pull out that equity to go and do something with it?

Speaker 40:39

Absolutely. Absolutely, yeah. And our rates are really at this point right where banks rates are right now, at least this week and last week. And so yeah, you can do a number of different things. One, if you have a several properties, we do what's called a portfolio loan. And so you can have one payment. Everything is combined into one. So if you've got a couple of great functioning properties and one that's not, you can roll those all into one and then pull money out. You can roll things into a DSCR loan. You can roll things into 10-year interest-only DSCR loans. Like DSCR is a really great way to refinance and recapitalize and try to go back out there and buy some more. So I think every, you know- Everybody's getting frustrated right now out there trying to find deals, 'cause it's hard. So I think there's gonna be some people that are gonna be giving up here soon and, or probably already have. And there's gonna be opportunities, I think, in the next year. So I think you wanna be primed and posit- positioned to do that. That's why I, like I said, that's why I refinanced a couple of properties myself.

Speaker 2 41:37

I used to be pretty big on BiggerPockets, like on- Yeah the forums. I would go there, I would post, I would reply to people. And I just do not know if the use of online platforms changed and people do not use it that more, or that much anymore, or this is just the sign of the current market. 'Cause five years ago it was hot. Everybody was buying, everybody wanted to get in real estate. I have some extra $100,000 and now I am real estate investors. Now I don't see any of that.

Speaker 42:07

Yeah.

Speaker 2 42:07

And I think that's connected to the market, what we see that it's not that easy. You need a little bit more money. You need to know what you're doing, and it's not for everyone. And-

Speaker 42:19

Yeah

Speaker 2 42:20

definitely not easy to find a good deal or a deal that makes sense.

Speaker 42:24

I 100% agree with you. 100% agree with you. It was, We saw this kinda like... I was pretty young-ish, just graduating college in that 2008 to 2012 timeframe where it was, really 2006 to 2010, or 2008, excuse me, everybody with a pickup truck and a Bluetooth headset was flipping houses and making a bunch of money, and that... A- and it kinda f- felt a little bit like that again, right? It wasn't exactly like that, 'cause obviously there were a lot of different factors there. But the last few years have kinda felt like everybody wanted to get in real estate, right? You're right. BiggerPockets is huge. Love BiggerPockets. Great place to learn. But if you really read BiggerPockets, it tells you how not easy it is. Not... But everybody was reading it thinking like, "Oh, this is so easy."

Speaker 2 43:08

Yeah.

Speaker 43:08

I had friends coming up to me like, "Tim, let's buy a bunch of real estate together." I'm like, "You don't know what you're talking about." So yeah, I agree. I think it's gotta take a little bit of a shift, right? There's gotta be some place somewhere where people are gonna be able to make a couple bucks off of it. So hopefully you and your investors are primed to take advantage of it. And yeah, I think your HELOC thing is a good idea. Refinancing something. Not at a crazy... you don't have to, you don't have to... if you own a property free and clear, you don't have to put it at 75% leverage, right? You don't even have to put it at 50% leverage. You can put it at 35% leverage and still be making m- monthly cashflow and have some extra cash to, to deploy if and when you need it. So th- think about that. If you own something and you're... Shit, if you only own 30% of it, or you own... If it's worth 100,000 bucks and you only owe 30 on it now, or 20 on it- You can still refinance that and not even have it at 75% LTV and still be making money on it. Again, be flexible, be prepared is what I would say.

Speaker 2 44:10

I would also ask even if you refinance at 75%, make sure that you still cashflow at that.

Speaker 44:16

Correct. Correct. Yep.

Speaker 2 44:17

You don't want to take everything out and then just put money out of pocket every single month.

Speaker 44:22

Do not do that. Absolutely. A DSCR loan will not allow you to do that 'cause the mon- because it has to cashflow. So forgive me for not clarifying that specifically, but yes. Do not refinance to start losing money every month 'cause that's gonna, that's gonna sink... It might help your tax bill there, Yuriy, but it's not gonna be fun monthly.

Speaker 2 44:40

Yeah. But also you need to make sure that you have something to fall back on when, you have that expense that you were talking about. Yep. Your HVAC breaks and you need to put 12, 15K out to just replace that on your... or you need a new roof and things like that. So- you do need to make sure that you have some kind of reserves for your- Reserves. Yep property to keep it running. We- Absolutely yeah we definitely had problems when landlords just did not have any reserves and they were not able to do repairs. And of course, as property managers, we cannot just go and pay ourselves. We- we need to use your money to pay for the repairs. And we had problems when tenants would complain to L&I and it, it would just become a huge problem for a landlord. They don't have money to fix it, tenants don't want to pay rent, and they start complaining to L&I, and now you're like sitting duck. You don't have money, and now tenants don't pay you. Now you don't even have money to cover your mortgage. So it's a nightmare. You don't want- to be in that position. You want to make sure that you always have some cushion for your, whatever it is, one property, 5 units, 15 units, you need to have that reserve that you can use to tap in if something were to happen, and something will happen. It- Always it may not happen in year one, it may not happen in year two, but it will happen. It's inevitable.

Speaker 46:02

100%, 100% of the time.

Speaker 2 46:04

Yep. And the more units you have, the more chances you have that something will go sideways.

Speaker 46:11

Yep. Agreed.

Speaker 2 46:13

Tim, this is great information. Is there something that I did not ask you about but you think that people need to know?

Speaker 46:23

I don't No, I think that was a great conversation. I think we hit a lot of things. I think I just go back to, be prepared, right? Be prepared. I know the market feels crappy, and it's easy to get frustrated right now, but be prepared. Whatever it is, be prepared. Have your team set up, have your financing set up. Be looking at as many deals as you can, and be prepared to pull the trigger quickly. And that's the way to get a- to get ahead. If you're doing this passively, if you're, spending 90% of your time managing your properties and only 10% of your time looking for deals, you're gonna be behind everybody else. So I would just say be prepared and get on it, and happy hunting all.

Speaker 2 46:58

Sounds good. And if anybody wants to get in touch with you or reach out to LendingOne, lea- learn more about LendingOne I will drop a link in the show notes so people can just go to the link and get in touch and see what you can do for them.

Speaker 47:13

Awesome. Yeah, I know we do a lot of work in Philly. Thanks to you, Yuriy, and a couple other folks. So yeah, Philly and the surrounding areas, we'd love to hear from you. And, you can call us. My team is on our partnership side, Yuriy, if you give me a second just to pitch a little bit.

Speaker 2 47:25

Sure.

Speaker 47:26

We have a couple of dedicated loan officers. You're not gonna get round robin like you are someplace else. Our team knows investors, they know property managers and they're dedicated to our team only. So yeah, so we love talking about deals. Our... My guy, Edward, he walks through deals with folks nonstop. He walks through them with me. So happy to talk about deals, make sure they work, get a little cr- creative for you all, see if we can help folks make a deal work. So yeah don't hesitate to give us a call just to chitchat, even if you don't have something on the hopper.

Speaker 2 47:54

I actually just got another question for you, Yeah while we're talking about it. Having a property manager manage your property, does it help you to get DSCR loan, or do you like when people have property managers?

Speaker 48:09

Love it when l- It doesn't impact the underwriting as much. Our partners our... Anybody who is referred from one of our partners does get a little bit of a break on our fees, so it helps you in th- in terms of that. It does not help you in terms of underwriting. Again, we are just underwriting the asset. One thing I will mention, though, that might be related, I was describing the ratio for a DSCR loan. And it is rent divided by principal, interest, taxes, and insurance. We do not count property management fees against you. So if you have a property manager and they charge you X percent of your monthly rent, that is not built into the equation. So as you're looking at deals, keep that in mind as well. It's really just principals, incis ta- i- interest, taxes, and insurance.

Speaker 2 48:56

Okay.

Speaker 48:56

Yeah. It's real- I love it when there's property managers there 'cause I know that it, their property's gonna be managed well, they're gonna be getting a lot more rent than typically other folks, and the property's gonna be taken care of. I love it. It doesn't necessarily change the underwriting process too much for us.

Speaker 2 49:10

Yeah, that makes sense. Thank you, Tim, for a lot of information. I hope this is useful for our listeners. This was exactly the kind of conversation I wanted to have. Someone who has been in the trenches of property management at scale, and now can speak on how the financing side actually works for investors trying to grow in this market. Really valuable. Thank you for being here, Tim.

Speaker 49:33

Yes, absolutely. Thanks, Yuriy.

Speaker 2 49:34

For everyone listening, if you like today episode, and if you want to learn more about LendingOne or connect with Tim, click the link in the show notes. If this episode was useful, leave us a review, share it with a fellow investor or landlord in Philadelphia, and subscribe so you don't miss the next one. Until then, keep your properties clean, stay legal, and I'll catch you in the next episode