Investor Stories

The New Investor: We encountered a unique situation where an investor who had never completed a real estate transaction was interested in acquiring a property through a Debt Service Coverage Ratio (DSDR) loan. Despite having significant liquidity (savings), this first-time homebuyer struggled to secure a loan from other hard money and DSCR lenders. However, when MoFin became involved, we paid close attention to his circumstances and looked at his scenario holistically. We asked why he hadn’t considered a bridge loan, which had no restrictions to first-time home buyers. Moreover, we advised him that within six months of leveraging a bridge loan to purchase the property, this investor would meet the criteria for an “experienced investor,” and qualify for a DSCR loan. Surprisingly, he had already spoken to four lenders through the Bigger Pockets platform, none of whom asked the right questions or provided this alternative solution. It is astonishing these lenders overlooked such an obvious option, but it happens. This conversation reflects what occurs for MoFin a normal basis. In the end, we granted an exception and provided him with a DSCR loan despite not meeting the requirements for that program. We made the exception because we took the time to speak to him in-depth about his deal and his creditworthiness. There were many compensating factors (such as a great credit score, slightly higher down payment, great cash-flow on the property, and having significant liquid reserves) that made the decision easy. 

The Cash Investor: Another scenario that frequently arises, which surprises many investors (since they’re unaware of the product), is the use of Delayed Financing, particularly in auction and wholesale deals. Wholesalers often seek to close transactions within a week’s time and auctions typically don’t let you in the property. With Delayed Financing buyers who close in cash can do so with the confidence that they will be able to get financing from us after acquiring the property. The reason why we can’t close within a week is that we most often need to get an appraisal done. And, with many auction and wholesale deals, the seller provides limited interior access due to bank restrictions or time constraints.  In these cases, MoFin reviews the detail as best possible upfront and quotes terms. The investor then proceeds with the cash purchase. We get the appraisal done right after they close, and we close our loan to them 1-2 weeks after their original closing date. This strategy, known as Delayed Financing, allows the buyer to keep their initial 10% – 20% (depending on experience and credit score) investment in the deal while accessing the remaining funds through our loan. The loan isn’t considered a cash-out refinance, despite the investor walking away with cash at closing. That’s advantageous to the investor since purchase-money terms are more favorable than cash-out terms. 

Unpacking the Partnership 

Tyler and I share a healthy and dynamic partnership. We possess contrasting personalities and strengths. I run the front-end of our business, which is everything from loan sizing/pricing, marketing initiatives, and business development with both loan buyers and borrowers. Tyler is more on the back end of the process and our operations. He handles the final pre-close review and closing of each loan. He also handles the sale of each loan and oversees the post-close aspect of the process (management of our portfolio, servicing, & loan performance). My focus is finding solutions, ways we can get a loan done, pushing to do more, and creating whereas Tyler is more conservative, extremely detail oriented, and realistic. This yin-and-yang dynamic allows us to complement each other and make transactions with investors work more effectively. I love talking to people and learning about their deals, their plans, and goals. I’m extremely personable and analytical. Tyler is a wizard when it comes to numbers and his experience in the capital markets has greatly benefited our partnership and our company’s success– it’s added depth and perspective to our decision-making processes.  

Time also played a crucial role in our partnership, as we have been working together for eight years. Over this duration we developed a shared understanding and approach. Questions from borrowers or internally often elicit the same answers from both of us.  Even though we’ve adopted the remote office environment, we continue to communicate frequently and collaborate closely to make sure our operations remain consistent. 

Unpacking Pain Points

Investors often have specific challenges and concerns. These are influenced by their geographical location, financial circumstances, and goals. However, from a financial standpoint, one of the common concerns in the current volatile environment is the certainty of closing deals and the ability for a lender to execute. Many real estate investors face similar experiences where they initially receive positive feedback and superb terms from lenders, only to be met with sudden changes or being repriced terms – the old bait and switch. I think now, more than ever, we’ve seen this be the case with many of our competitors.