Dominic Leoni and Erik Anderson founded Bayside Funding Corporation to provide reliable answers and a smooth closing process for real estate transactions. Helping to create a knowledgeable choice in what can be a tricky process, Dominic and Erik share their expertise on investment properties and how Bayside Funding can help.
How Is Bayside Funding Different?
Bayside Funding Corporation has made it a focus of our business to serve our Single Family Office and Multi-Family Office real estate investors and lenders, mainly located in South Florida and New York City. Working closely with lending departments at private institutions is advantageous to our clients due to looser guidelines and product flexibility. With tight Fannie Mae and Freddie Mac guidelines, working with a family office or private equity firm can increase your chances of qualifying, especially for self-employed borrowers who take advantage of tax breaks with their form of income. Our family office partners allow us to provide a range of options to our different clients, each with unique income situations.
Our connections with Single Family Offices, Multi-Family Offices, and Private Equity funds allow Bayside Funding Corporation to lend on almost any type of real estate-backed transaction. We have most recently been working on placing several $10 - 30 million Construction to Permanent projects, Bridge Loans, and real estate-backed Equity Offerings. These kinds of private lending products allow investors and high-net-worth individuals unique ways to leverage their liquidity, enter new markets, and acquire assets in tax-efficient jurisdictions like South Florida.
What If Someone Is Looking For Just An Investment, Not A home?
If the property will be non-owner occupied (investment property) then a DSCR (Debt Service Coverage Ratio) calculation will be completed using the appraisers’ rental estimations against the monthly mortgage payment, taxes, hazard insurance, and HOA dues. Most lenders require close to a 1.0 DSCR ratio - meaning that the monthly estimated rents must be equal to or greater than the combined monthly payment for the mortgage, taxes, insurance, and HOA dues. As long as this DSCR ratio is equal to, or greater than, 1.0 then there is no income verification needed for the borrower. For properties $2,000,000+ many lenders are typically willing to lend 65% of the appraised value.*
This is a great option for many borrowers whose own assets may not yet qualify for traditional conventional mortgage products. DSCR loans also are a great way to purchase multiple investment properties without having to ever use your personal income to qualify. Certain lenders are also able to bundle multiple properties and their DSCR calculations into a single blanket loan product so an investor only pays 1 monthly payment across several financed individual properties.
*If you borrow over $1,000,000 or more on a mortgage, you will typically require two appraisals
Why Should Someone Invest in Multi-family?
Seasoned real estate investors lean towards Multi-Family properties due to the reliable cash flow from rental income. Where Single Family Residences have only one tenant or group of tenants, multifamily have many tenants paying rent. Even if there is a vacancy in one or a few units, you will still receive rental income from the others. 2021 saw some large financial institutions’ profits increasing 50% due to multi-family investing alone. Multi-family properties can be easier to finance due to the return on investment perspective. Banks, lenders, and lending institutions favor these properties due to the higher predictability of rental income each month. Depending on the size of the property and the structure of the loan, there is no personal income verification. The loans are underwritten purely to the cash flow of the property, provided you have the down payment. Multifamily investing is a great way to scale your rental property portfolio for those with experience investing in single-family residences.
Multi-family investments are not just great for their cash flow. Some landlords who own smaller multi-family properties are also looking to cut back on rental or mortgage costs on their own home by purchasing a smaller multi-unit property as their primary. Their goal is to move into one of their units while renting the others out. This can offset some of the owner’s housing expenses, or in some cases, completely cover it. This strategy can be very cost-efficient as long as you can afford a property in the area that you like. Less-seasoned investors are opting for this strategy as well to get their feet wet in real estate investing and reduce their monthly expenses.
Where Would You Recommend Getting Started In Multi-Family Investing?
Growing hotspots around the country like Miami, DC, San Antonio, and Phoenix are great for multi-family investing, with residents migrating in the thousands every day. These cities are prime spots for companies to move operations, especially if they are tax-friendly, like Miami. For example, powerhouse Chicago hedge fund Citadel announced its migration to South Florida over the past few months, bringing 1,000 employees with them, and another 1,000 residents looking for housing. Most importantly, you want to look for high growth/high yield areas where properties are in high demand. If you plan on short-term renting the units out, look for vacation areas where visitors are coming from out of state or out of the country. If you plan on long-term renting, look for locations with a high influx of university students, corporate company headquarters, and are in high demand for living.
Does Bayside Funding mostly work within South Florida?
We also lend outside of the white-hot South Florida market, in some 42 states for non-owner occupied real estate such as multi-family (5+ units), commercial real estate, and residential investments (1 - 4 units). Recent transactions have ranged from successfully closing a multi-family purchase transaction in Washington, DC for our client, securing financing on a $14 million urban revitalization and multi-family construction to perm project in the American South, to matching a confidential client with the proper private equity partner for a sensitive acquisition.
For more information on Bayside Funding Corporation please visit their website here.