ForumsFinancing Tips

Hi LVI - I worked as a lender for a bank that financed many investment properties. Some basic parameters;

• LTV of no higher than 80%
• Debt Service coverage of 1.25X (be sure that your net cash flow number is less expenses like taxes, insurance, and depreciation)
• On the personal side, you need to be able demonstrate ability to service your personal debts above and beyond the request. As the secondary source of repayment, they'll want to see some excess personal cash flow.
• Having tenants already in the property is always good. Having signed long term leases with national tenants (if its commercial) is fantastic.
• If you don't have 20% to put down in cash, you'll need to have additional collateral to put up
• Personal credit should be clean

Investing in tax liens is an interesting business. I had a client who had a fund that invested in them. From what I understood, the returns were decent and the collateral was good because most tax liens supercede lender liens. The hardest part was keeping track of the paperwork (monitoring who paid their taxes and sending in your certificate) and the fact that each jurisdiction has their own rules. One thing that they for the most part didn't have were foreclosures since liens tended to be small and a lender would pay them to protect their interest in the collateral.