Maximizing Cash Flow With Memphis Real Estate Rental Investments
In this episode, we dive deep into the power of cash flow in real estate investing. We’re joined by Jo Garner, a seasoned direct lender, to walk us through how real numbers and specific mortgage rates can lead to lucrative cash flow opportunities in Memphis. We focus on a prime example, the Sunnyview property, to showcase the potential of generating positive monthly cash flow through smart financing. With rental income projected at $1,700 per month and a selling price of $162,500, this investment property presents a solid opportunity for investors looking to make money now and long term. Jo explains how different mortgage options, such as Fannie Mae or DSCR loans, can turn this property into a strong cash-flowing asset. If you’re ready to discover the secrets behind successful real estate investments, tune in as we explore how Memphis rental properties can deliver real financial returns.
One of the key components to successful real estate investing is understanding how to generate positive cash flow from rental properties. In today’s episode, we look at the Sunnyview property in Memphis—an investment that highlights how pairing the right property with the right mortgage can create a cash-flow positive scenario. Jo Garner, an experienced lender, takes us through the specifics of this deal, demonstrating that when you secure a property at the right price with favorable mortgage terms, the numbers work in your favor.
For example, Sunnyview is priced at $162,500, and its expected rent is $1,700 per month. After accounting for insurance, taxes, and maintenance, investors can expect cash flow of around $450 per month. That’s real, passive income that starts paying off immediately. Jo breaks down mortgage rates and loan options, showing that even with a standard 30-year loan at current interest rates, this Memphis property provides excellent returns.
This discussion also highlights the importance of not waiting for the “perfect” interest rate. Investors who act now, while property prices are still reasonable, stand to benefit from future appreciation. Plus, there’s always the option to refinance later if interest rates drop. By taking advantage of the current market conditions, smart investors can build their portfolios and see real cash flow sooner rather than later.
In this Maximizing Cash Flow With Memphis Real Estate Rental Investments episode:
- Real Cash Flow Example: Sunnyview Property – The Sunnyview property is a newly built home priced at $162,500. With a projected rent of $1,700 per month, this property offers a substantial cash flow opportunity. After taxes, insurance, and a $200 monthly reserve for maintenance, investors can still expect a cash flow of around $450 per month. This makes it an excellent choice for those looking to invest in rental properties that generate immediate income.
- Fannie Mae and Freddie Mac Financing Options – Jo Garner discusses how traditional Fannie Mae and Freddie Mac loans can help investors with a lower down payment option of 15%. These loans come with lower interest rates, making them ideal for newer investors who want to maximize their cash flow without significant upfront costs. For the Sunnyview property, this type of loan can lead to immediate positive cash flow, allowing you to start earning from day one.
- DSCR Loans for Seasoned Investors – For more experienced investors, Debt Service Coverage Ratio (DSCR) loans offer flexibility and fewer documentation requirements. While DSCR loans may come with slightly higher interest rates, they allow you to finance properties under LLCs and focus solely on the cash flow generated by the property. Jo highlights how these loans are perfect for investors with multiple properties or complex financial situations, helping them secure deals like the Sunnyview home with ease.
- Maximizing Cash Flow With Mortgage Planning – Jo emphasizes that mortgage payments are not a simple expense but a tool for building wealth. By focusing on financing strategies like refinancing down the line when rates drop, investors can optimize their monthly cash flow and benefit from rising property values. The key takeaway is that investing now allows for immediate rental income and long-term growth, making it a winning strategy for both new and seasoned investors.
This episode highlights a key principle of real estate investing: securing a cash-flow positive rental property can be one of the most effective ways to build wealth. The Sunnyview property in Memphis, priced at $162,500 and with a rental income of $1,700 per month, offers investors a real opportunity to achieve that. With a positive cash flow of around $450 monthly, after accounting for all expenses, this investment is a prime example of how pairing the right property with the right mortgage can lead to significant returns.
Jo Garner’s insights on financing options, from Fannie Mae and Freddie Mac loans to DSCR loans for seasoned investors, provide listeners with actionable strategies to maximize their real estate returns. The discussion underscores that even in today’s market, investors can find properties that offer immediate income and long-term growth. By acting now, smart investors can lock in lower prices and refinance later to optimize their cash flow further. Ultimately, this episode demonstrates that, with the right financing and planning, real estate investors can secure deals that generate meaningful cash flow and set the stage for future financial success.
Maximizing Cash Flow: Memphis Real Estate Rental Investments
Podcast Transcript
Brett
0:00:40 – Welcome to this 5 o’clock summer real estate podcast. Today we’ve got Jo Garner in the studio with us today. Jo Garner is a direct lender. We’re going to talk about some specific properties we have, and Joe’s going to make some recommendations on type of financing that can be available for those and interest rates. So stay with us. We’ll be right back.
Brett
0:01:36 – All right, welcome back. In the studio with me is Jeff McNett and Jo Garner and Nick Gibson, one of our other team members. He’s actually with the fire department, so he’s on shift today, so he’s not with us today, but we do have Jeff’s lovely wife, Audrey, as we call her, Angel, in the studio with us. She’s going to be doing a lot of feed for us. Hopefully people will be nice to us when they send us questions. So Joe, tell us a little bit about your company.
Jo
0:02:01 – Okay, I’m in the lending business, the mortgage business, Brett, and we are direct lenders with Fannie Mae, Freddie Mac, and all of those traditional products. We also have the ability to do some outside of the box products for people, low documentation, some special stuff for investors. So it’s an exciting time to be in the lending business. I’m a mortgage loan officer.
Brett
0:02:26 – Before we get into the details, have you seen an uptick in business with the interest rate drop? I know we had this discussion, interest rates and the amount that they dropped doesn’t really have a huge impact on payments for investors, but it has some impact, but not
Jo
0:02:41 – – It does.
Brett
0:02:42 – Are you seeing an increase in business or activity?
Jo
0:02:45 – Right after the Fed went down, we had a lot of calls because a lot of people believe that mortgage rates are tied to the Fed. They’re really not so much tied to the Fed. The good news is mortgage rates had started going down a few months ago and we’re hanging in and around a 15-month low, Brett, on these mortgage rates. To give you an example, last October 2023, we were on a residential first-time home buyer, all of that, 8.25% on a 30-year fixed rate. Today we’re in the sixes. So I mean it’s a huge difference whether you’re buying the house to live in it or whether you’re buying the house as an investment. Now your investment interest rate is going to be a little higher, but it’s still commiserately lower than what it was a year ago.
Brett
0:03:33 – Now I read something and I don’t know if the math is correct on this, but it stated that if someone buying a $400,000 house, if the interest, the rate goes down 100 basis points or an entire point, the debt would say then I think it was $40 a month on their mortgage.
Jo
0:03:49 – I did the numbers the other day for a client. If you’re dropping the loan amount by $10,000, that’s going to save you about $60 or $70 a month. Okay. Interest rates are going to save you a little bit too per month.
Brett
0:04:03 – Like 20 bucks, 40 bucks.
Jo
0:04:05 – Not a whole lot.
Brett
0:04:06 – Because I talk a lot. Let’s say, so we get a lot of investors that we call them bandwagon investors. They just kind of sit there and wait for everybody else to jump and then they jump. Smart investors buy right now knowing that with the potential of an economic turnaround and interest rates coming down that values and rents are going to start to increase and that you could take advantage of growth in equity, growth in rents. So buying now is a good idea and I always hear the same thing, well, but I’m waiting on interest rates to come down. But then when you realize, well, if it goes down a whole point, you’re going to save $25 a month. Is that worth giving up a potential 10, 15, $20,000 equity jump next year?
Jo
0:04:43 – That’s a very good point, Brett, and there are some formulas out there on cost to wait. And right now, if the forecast are correct and when mortgage rates drop, home prices are going to spike upward, we’re already in a shortage of inventory situation. When you lower the amount of supply of homes for sale and you increase the demand, what does Economics 101 tell you? Prices on those homes are going to go up. You’re not going to have the selection.
Brett
0:05:15 – It depends on your political viewpoint. But yes, in reality, that is the case.
Jeff
0:05:21 – Well, I guess what she’s saying is you’d rather buy a $400,000 house at 7% than the same $650,000 house at 6.5% at the end of the day. If you’re sitting on the fence, now’s the time to jump on that deal.
Brett
0:05:37 – Absolutely, because you save yourself $25 a month on an interest rate. Great, that adds up to what, $300 a year. But you waited till March to buy because the rate went down a point and that house that you could have bought for $100,000 is now $125,000.
Jo
0:05:55 – That’s a very good point.
Brett
0:05:56 – Why wouldn’t you just buy it at $100,000, take the leap. And then guess what, your equity goes up, rates drop three points, go refinance. Refinance it, get your cash flow up, but you’ve got all the equity.
Jo
0:06:07 – There you go. We have a saying for that, Brett. It’s marry the house and date the interest rate.
Jeff
0:06:13 – There you go.
Jo
0:06:14 – If you can buy the house today at the price it is today, even if the rate is a little higher, you own the house, you’re sitting on the equity that’s growing, presumably it’s going to be growing, and you can always refinance, give yourself a raise later on when rates get down low enough.
Brett
0:06:30 – Because that’s actually the issue is that cash flow is affected by interest rate because it lessens your cash flow. But if you take the whole scheme of the payment and all your expenses and instead of $275, you’re only making $250 but you can gain $15,000, $20,000 equity in a very short period of time through the recovery of the market, what makes more sense?
Jo
0:06:52 – Right. Right.
Brett
0:06:53 – And I preach it. I don’t know if anybody is listening. I don’t think anybody listens to me. They listen to Jeff but not me.
Jeff
0:06:59 – There’s a lot of people sitting on a fence right now. Keep preaching.
Brett
0:07:02 – Yeah. Well, I’m glad you validated my belief. Absolutely. Thank you for that. So, hopefully, the people that are out there listening will listen to an expert and not just because they’re not listening to me.
Jo
0:07:12 – Well, I absolutely agree with you and I would rather have the selection of homes that I want and not have to compete with several people and keep having to pay way over list prices to get a house. I mean, especially if you’re an investor, you’ve got to buy it right with the right terms in order to make money at least over time.
Investor Tips From The Other Side with Glenn Greene
Brett
0:07:33 – All right. So, most of you know that our patriarch, the guy that kind of founded this team and designed the system we use and taught all of us how to do this business the right way and handle our investors was Glenn Greene, he’s a good friend of mine who passed away last May. So Richard and I have been talking and Richard’s kind of a weird British guy so he thought that he could reach the other side where Glenn is and see if we can get him to interact with us on our podcast show because he used to be on our show. So we’ve done that. I don’t know how this is going to go, but let’s see.
Glenn
0:08:17 – Hey guys, it’s Glenn. That’s right, from the other side. Richard reached out to me, so I thought I’d stop by and say hello. Hey, what’s up boys?
Brett
0:08:28 – Hey Glenn, how you doing man? It’s good to hear from you. It’s been a long time. How’s the other side going? Everything good over there?
Jeff
0:08:32 – What’s going on, Glenn?
Glenn
0:08:53 – You know, I’ve been doing a lot of thinking lately. Not much else to do around here, if you know what I mean, but I was wondering if you all knew. Did you know if you invest in a strip club, your pole cleaner is deductible on your taxes? Can you believe that?
Brett
0:08:56 – No, I did not know that. But now that I think about it, that makes total sense. Yeah, I don’t know if any of our investors invest in strip clubs, but Glenn, I appreciate that advice because we may, I don’t know if I really want to list and sell strip clubs to my investors, but Jeff, did you know that pole cleaner is deductible?
Jeff
0:09:18 – I did not know that.
Brett
0:09:20 – So every week, I guess, Glenn, you’re going to come back and check in with us from time to time.
Glenn
0:09:26 – Yeah, man, I’ll do that when I can.
Brett
0:09:28 – We wanted to call on you some more and understand what things are like on the other side and have you give us your wisdom from the other side because you are the patriarch who designed our system and how we do business with our investors.
Glenn
0:09:38 – I’ve been listening to the past few episodes you guys have been putting out and…
Brett
0:09:44 – What do you think?
Glenn
0:09:44 – Quite frankly, I’ve been disappointed. You haven’t called on me more for my insight.
Brett
0:09:50 – Well, that was Jeff’s fault. I wanted to call on you, but Jeff and Richard wouldn’t let me.
Glenn
0:09:53 – Now I’ll let you off just this once, but if it happens again, I’ll have to burn down all of your houses. Capiche?
Brett
0:09:58 – Well, you don’t have to be that extreme, man. I mean, interest rates have come down finally. So I know they were, when you were physically here, they were pretty high and business was kind of rough, but interest rates have come down. Jeff has actually started selling some houses. He’s got some investors and builders he’s working on. Nick’s doing well. So everything seems to be going well.
Glenn
0:10:16 – Ah, okay. That’s good. That’s good.
Brett
0:10:18 – Keep over there. We’ll get in touch with you next week. We’d like to have you on and give us another investor tip, man. Thanks for coming in.
Glenn
0:10:23 – No sweat, buddy. It’s always good to check in. This has been another segment of Investor Tips from the other side with me, Glenn Greene. Back to you, boys.
Brett
0:10:32 – All right. Well, let’s get into what our main topic is going to be. Let’s take a property. Now, this property is one from our builder. It’s 4476 Sunnyview. It’s in Fraser, 38127. Brand new home. It’s not finished yet. It’s already sold, but it’s not finished. I take it back. No, this is sold. We sold this one for $162,500. It is expected to rent MHA for, is this correct, $1,700 or is it more than that? $1,700. $1,700. All right. Now, it’s brand new with the one year bill of warranty, so your all in cost is $162,500.
Brett
0:11:05 – That’s what you’re in it for. I did the insurance and taxes, roughly your expenses per month with insurance, taxes, management, and putting $200 a month in a reserve account. Oh, window got broken, oh, plumbing leak, whatever it is. And that gives you a cash on cash return and let’s clarify, cash on cash means is no different if you just plop down cash, bought the house, here’s what your return is of $1,022 per month out of your rent after your expenses. That gives you a 7.55 cap rate, which on a rental property after expenses, 7.55 cap rate in the first year. On a brand new home, needs no maintenance and everything is covered under warranty. So this does not calculate what’s your mortgage payment. And I’ve said it many times on this show, Jo and I talked about this at lunch and you did agree with me at that time, I’m assuming you still do, is that your mortgage payment is not an expense. Your principal portion of your mortgage payment is not an expense. The bank gave you the money, you’re paying back the money. It’s a wash. It’s in and out. So you don’t really calculate that into your cap rate. You do calculate it into your cash flow, but that money’s not coming out of your pocket because the house is rented. So your tenant’s basically paying your expenses and the profit that you’re making on the property, which in this case gives you, Joe, in this situation, what do you think the cash flow would be on that 1022 take home if they got a current mortgage today?
Jo
0:12:30 – You said how much is the rent again?
Brett
0:12:32 – Rent is $1,700.
Jo
0:12:33 – Okay, so if you sold it for $162k, looking at your taxes and insurance estimates, it looks like your payment is going to be around $1,200 or $1,300-ish PITI.
Brett
0:12:46 – Really?
Jo
0:12:47 – Yep, somewhere in there if you sold it for $162k. And you’re getting how much for rent? $1,700?
Brett
0:12:55 – $1,700.
Jo
0:12:56 – Okay. So you’re going to have a positive cash flow going in immediately of about 450 bucks.
Brett
0:13:04 – Okay. All right. So it’s producing the numbers we need it to produce.
Jo
0:13:08 – Oh, more than, yes.
Brett
0:13:10 – Right. So that’s why I want to talk about this so much is because we’ve never been able to tell people, well, I don’t know what your mortgage payment is going to be, so I don’t know how much cash flow you’re going to actually take home. But in this case, you’re saying that out of that cash flow, someone could make $400 a month off a brand new home with a one-year bill of warranty and putting, is that including putting $200 away for the…
Jo
0:13:32 – No, you’re going to have to take that money out of the $400. So you’re still making a positive cash flow.
Brett
0:13:37 – You’re putting $200 a month in the bank. You’re not spending that and you’re putting $200 a month in your pocket. The smart move would be to put $400 a month in your account until you get enough built up and then make sure you’ve protected yourself for the following year when those warranties start to wear off. Now, all your major components have warranties, extended warranties, but the bill of warranty expires after a year.
Jo
0:13:56 – Yes. And this is on a Fannie Mae loan.
Jeff
0:13:58 – You need to roll all that money back in to the investment.
Brett
0:14:00 – You should. And we’ve talked about that. Jeff’s a proponent of take 100% of your cash flow and pay down that mortgage as fast as possible.
Jeff
0:14:10 – Get your reserve billed up for the repairs and maintenance and then just start paying the principal on those mortgages down.
Brett
0:14:16 – Because the sooner you own that home free and clear, guess what, the more cash flow you’re putting in your pocket and the less money you’ve got to put aside.
Jo
0:14:23 – Well, just for our investors out there that are scratching their heads saying, well, how much do I need to pay extra and how much am I going to save? On a 30-year loan, which is what I’m calculating on this one, Brett, if they made one just principal and interest payment per year, one principal and interest payment, one extra principal and interest payment, not including taxes and insurance, just one a year, on a 30-year loan, if you start immediately, you’re going to save about seven years, eliminate seven years off the mortgage.
Brett
0:14:51 – But if you take the $200 and pay $24 a month, you’re actually doubling that. So you actually could do this in 15 years or 16 years.
Jo
0:14:59 – You could calculate it on an amortization schedule really easily on how fast you want to pay off this mortgage. But paying it in the beginning because of the way the amortized payments work, an amortized payment, you’re going to pay a portion of that principal and interest toward principal and a portion toward interest. Well, in the very beginning of the loan, you’re only going to pay a very small amount toward principal. Almost all of the principal and interest payment is applied to interest. So you can do the math. In the beginning of the loan, you can pay a little bit and get rid of a lot of interest if you start in the beginning, but if you start at the end, almost all of your principle and interest is principle, you’re really not gaining anything.
Brett
0:15:44 – Well, let me ask you this question. All right. We understand that the investor that buys this house can cash flow it.
Jo
0:15:49 – Absolutely.
Brett
0:15:50 – And if they do it right, they can pay this thing off in 15, 16 years and guess what? By that time, you’ve got a $240,000 house paid for that’s probably at that point producing $2,500 a month. Right. Do that 10 times, right? And then 15 years, if you’re 30 and you’re 45, guess what you’re doing? You’re retiring.
Jo
0:16:06 – Beautiful.
Brett
0:16:07 – It’s not hard to do. People make it complicated. I would say the seminar experts around the country that charge you money to give you their great ideas, they’re making it more complicated than it is. So let me ask you this. Out of, so they’re buying this home, $162.500, they’re going to get a loan. What is their loan to value? How much cash do they need to have in the bank to close this loan?
Jo
0:16:27 – Okay, well in the mortgage world, we’re all built on risk levels. So assuming you have a good credit score, something over 740, maybe 780.
Brett
0:16:37 – Most of our investors have good credit score, make good livings. We have a few that have good credit score, make a modest living, but have stacked away some money in the bank.
Jo
0:16:47 – Okay. Well if we went the traditional route Fannie Mae Freddie Mac Usually your rate is lower than what you’re going to get on a low document loan a lot low documentation outside the box loan. So let’s talk about Fannie and Freddie – Fannie Mae has a program where as an investor on a single-family home you can put down 15% that’s all you have to put down you have to pay a little mortgage insurance per month until you can pay that loan down and also have the value go up over time. You can do that. So that’s a great opportunity for investors. I’ve got some investors I work with on the mortgage side that start out that way. Once you get into a situation where you’re holding quite a bit of real estate, or you’re self-employed, you have a complicated tax return, then it becomes more advantageous to pay maybe a little bit more on the rate, maybe a little bit more on points, and do a low documentation loan. And Jeff and Brett, I just want to say we talked about this the other day, one of the trends that I’m seeing are that investors are looking to insulate themselves from risk. So those investors who own a lot of property, they’re typically putting those properties into an LLC. Well…
Brett
0:18:09 – Personal risk is what you’re talking about.
Jo
0:18:10 – Personal risk. So Fannie and Freddie will not do a loan that’s secured on a property owned by an LLC. At that point, we go to the non-traditional mortgage route. We call it DSCR, Debt Service Coverage Ratio, and it you know the only place we’re going to look for income is on the lease we just make sure that that the PITI payment does not exceed the amount of the lease amount they get.
Brett
0:18:38 – Can I interject? You said something to me the other day that blew my mind. What do they consider in that PITI for determining if the rent covers the note?
Jo
0:18:49 – Okay they… That’s a great question.
Brett
0:18:51 – Because I thought it was all these different expenses and you know what your net was but you said that’s not true.
Jo
0:18:56 – No, on the DSCR you’re right, we are only looking at the principal and interest taxes and insurance, a homeowner’s association fee per month if there is one. So we’re just looking at the debt service on that subject what that property is bringing in and gross rent income. Now the DSCR programs I work on, most of them are one to one ratio. They want to make sure that at least your lease income is covering your debt service. There are programs through DSCR where even if you’re upside down, you’re not making money right now, they’ll still give you a loan but you’re going to pay a higher rate for that but they’re out there.
Brett
0:19:35 – Is there a limit to how many DSCR loans you can hold? Because I know with, I think Fannie Mae, you have up to 10.
Jo
0:19:43 – Right. The point that I wanted to make about those is that these outside of the box DSCR lenders will do a loan on a property held by an LLC. These non-traditional lenders on DSCR, they’ll do a loan that’s maybe not just a traditional rental situation. They’ll do mid-term rentals, short-term rentals, Airbnbs.
Brett
0:20:07 – As long as you show that you can get the cash flow to pay the note, that’s it. They’ll do the loan. But do they cap you at how many DSCR loans you can have?
Jo
0:20:16 – Some lenders will per lender. The beautiful…
Brett
0:20:20 – There’s no standard rule that says you can only do 10.
Jo
0:20:22 – There’s no standard rule on the outside of the box loans. If one lender says, hey, I’ll only do five for one investor, well, we’ll just, we’ll do the five with them and then we’ll go to a different lender and do another five. Fannie Mae and Freddie Mac, on the other hand, these government-backed or quasi-government-backed loan programs will limit you on how many financed properties you can own. So it really, Brett, to determine which financing vehicle we’re going to use for your investors, we’re going to do some discovery questions. We’re going to find out where they are, are they beginning, what type of documentation do they have, what type of property do they have to determine do we want to start out with a Fannie and Freddie, maybe with a lower rate, maybe lower move-in cost or do we want to start immediately with an outside of the box type financing package?
Brett
0:21:19 – But if you can go Fannie, what you’re suggesting is go Fannie Freddie first.
Jo
0:21:21 – Yeah, sure, if you’re going to hold the property. Yeah, lessen your interest rate.
Brett
0:21:25 – And once you cap out with Fannie Freddie, then you can convert over to DSCR.
Jo
0:21:28 – Correct. That is correct.
Jeff
0:21:29 – So Fannie and Freddie might be a better option for a new investor that’s not an S-Corp or an LLC. He’s going to start out with one or two properties at a time.
Brett
0:21:39 – Is there a difference in cash flow out of pocket for closing? If I’m making a choice and I’ve got to bring 20 grand down for the Fannie Freddie but DSCR, do I have to bring more or is it about the same?
Jo
0:21:50 – Again, based on risk levels, credit scores and that kind of thing. Fannie Mae is the only quasi-government backed loan that only requires 15% down from an investor. Most all of your DSCR investors are going to require a minimum of 20% down.
Brett
0:22:08 – Okay. So, yes, so maybe Fannie Mae is cheaper all the way around.
Jo
0:22:09 – Absolutely.
Brett
0:22:10 – But Fannie Mae caps you. Once you get to house 10, you’re kind of, you’re done.
Jo
0:22:14 – That’s right. They’re going to limit you. They’re going to want that house to be in your personal name.
Brett
0:22:17 – Gotcha.
Jeff
0:22:17 – Circle back and tell me the advantages of a DSCR loan for a more seasoned investor?
Jo
0:22:40 – Okay. Good question, Jeff. So, the DSCR, the big plus for that is if you’ve got an investor or a self-employed person who can’t show on their tax return enough net profit to qualify or they don’t want to have to come up with a truckload of documents, DSCR is a wonderful opportunity for them to get a loan without having to come up with a lot of documents. Another advantage for the DSCR loan is that they’re not restrictive on the fact that your property you want to put it in an LLC versus have it in your personal name.
Brett
0:23:03 – Or that you’re self-employed and basically income documentation is a lot less with DSCR.
Jo
0:23:09 – It is a lot less from the get-go.
Brett
0:23:10 – So it’s good for self-employed people who have complications getting loans because obviously, as we all know, we write off everything we can from our shoelaces to our hair cream.
Jo
0:23:19 – Yeah, and you got a great CPA. It makes it hard on us mortgage officers. Somebody who owns a lot of property, they don’t want to have to come in with all the documentation on every property they own. A DSCR allows them that streamlined, quick, easier way to get in and get the loan and get closed.
Brett
0:23:36 – But you pay for that convenience?
Jo
0:23:38 – You do pay a little bit more but if you really look at it it’s not that much. Right now we have an unusual situation in that the mortgage rate for someone with a high credit score is almost on some of these that I did off of your website the rate was actually the same for DSCR versus a Fannie Mae fully documented loan. Why is that? That’s because mortgage rates based on the bond market have actually moved up since the time the Fed went down.
Brett
0:24:13 – Really?
Brett
0:24:14 – But the DSCR are based on lenders that are using closer to the Fed rate model. Right now, a lot of times you’re going to pay a whole half a point or more higher on the rate for DSCR, but right now, it’s about the same.
Brett
0:24:32 – But again, we determined that on a half a point for $120,000 house is minuscule.
Jo
0:24:38 – Right.
Brett
0:24:39 – So cash flow-wise, there’s not a massive difference. Maybe out of pocket at closing, there’s a 15% versus 20% down. So Fannie Mae could give you a little bit less cash out of pocket, which most investors want to put as little bit of cash as they can into these properties. So to me, it just sounds like it’s just they need to get in touch with you, Joe, and just have you kind of evaluate their credit score and their income and if they’ve got current rental properties and determine what product works for them.
Jo
0:25:06 – We have a set of discovery questions that we ask investors that help us pinpoint at least one or two of the best products that are going to fit for that investor on making that property affordable today but knowing what their next five-year game plan is also helps seal the deal on which product we’re going to choose for them. Obviously whether they’re going to fix and flip or whether they’re going to buy and hold, I mainly work with investors who buy and hold.
Brett
0:25:34 – Okay. Well, it looks to me like we’re going to go longer than what our podcast producer allows. So I would like for you to give out your website, contact information real quick.
Jo
0:25:44 – I’m Jo Garner. I’m a mortgage officer and an investor, jogarner.com.
Brett
0:25:50 – We’re going to continue this in the next episode of our podcast. Go to MyMemphisInvestmentProperties.com. We got a for sale page. All of our off-market stuff is listed up there with descriptions, is listed up there with photographs. It will give you what the current rent is or what the market rent is supposed to be. So you can just run your basic numbers right there before calling us. So go to MyMemphisInvestmentProperties.com or call 901-692-7401.
About 5 O’Clock Somewhere Real Estate Investor Podcast
5 O’Clock Somewhere Real Estate Podcast throws out the script, brings common sense back to real estate, and has casual conversations about the one and only market that matters – Memphis! We’re not interested in what some real estate expert from California has to say because we know the truth: Memphis is where the smart investors put their money. Forget about Vegas, Nashville, and the rest of the country, Memphis is the blue-chip stock of the real estate world. We’ll tell you everything you need to know about why Memphis is the safest and hottest place to buy rental real estate, and how you can be a part of a smart investment.
If you would like to join the conversation, participate in an upcoming recording, or just call to bounce ideas off one of our team, you can call or text us at 901-692-7401. Or if you prefer send us a message.
Share this episode with your friends: