Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about how to qualify your clients for unlimited rental properties. Most brokers don't know this, and so we see rental property clients go bad. So what happens is eventually someone starts buying properties, right?
Scott Dillingham:And the lenders look at their income, they look at their debts and they say, okay, here's how much you can buy. So what ends up happening is the client eventually hits a brick wall. And when they hit that brick wall, the lender then says, sorry, you either have too many properties or your debt ratios don't work. So then what most brokers do is they'll look at the B lenders next, right? That's the next logical step.
Scott Dillingham:So the thing with the B lenders is they generally will allow someone to own more properties than what the banks will, and they also allow higher debt ratios and they use more rental income. So quite often the B lenders is a potential you know, solution. And then from there, they go with private lending. So private lending can be very expensive, many, many fees, but they don't care. They'll do the deal.
Scott Dillingham:It's it's good to go. I'm here to present a way better solution than all of that for you. But before I do, I just wanna like break down sort of how it works. So on the a lending side, you can expect rates. This is the 2025.
Scott Dillingham:You can expect rates anywhere from four to 5% for rental properties. B lending you could expect five to seven and privates you could suspect seven to I've seen as high as 15, right? Depending on the lender. So keep that in mind. So what I'm proposing to you is to tap into some of our special lenders that have a commercial program where they will review a property, even if it's a residential property, but they'll run it through the lens of the commercial underwriting, And by doing that, your borrower can ultimately get unlimited properties.
Scott Dillingham:Now, a couple things shift. When we're looking at this type of lending, they're not so much looking at debt to income ratios, and sometimes they're not even looking at credit. I've had clients with low credit scores qualify for this, because what the lender's looking at is the property. So they look at the income and the expenses of the property, and they determine how much of a loan that that property can carry. So that's the weak spot I would say, on the commercial loans is it's based on what the property can carry.
Scott Dillingham:So for an example, if you're buying a property and the lender comes back and says, Oh, you can only get 65% LTV. You know, a lot of clients may not like that, but on the flip side, if you look at it and you realize you're only being restricted on the LTV because the property's cash flow is weak, right? That's a signal. Okay, maybe I should buy something that's better, right? Buy something that's stronger.
Scott Dillingham:So, know, pros and cons there, but ultimately that's how it works. They'll lend you up to the point of the positive cash flow, maintaining that there is cash flow. And they'll do it unlimited times. Most lenders do want these to be in a corporation, but not all of them. Now I know I went over the rates of the different classes.
Scott Dillingham:So the commercial lending I find is four and a half percent to six and a half to seven, depending on the property value. So it is within range where it could be like an a lending deal or it could be sort of priced in the b lending side depending on what's going on. So that is the range there. Now keep in mind too, if you're going with a B lender or alternative lender, you can also expect a two to 3% fee. Private lending can be anywhere from like two to 6% fee, where on commercial, I find it's roughly a 2% fee.
Scott Dillingham:So keep that in mind, obviously residential has no fee, so that's ideal. We wanna go there first, but using this method that I'm teaching you here, your clients will be able to qualify for unlimited properties at cheaper rent lenders than their b lenders or their private lenders that they've been going to, and they can just grow their portfolio nonstop. Looking forward to hearing from you. Check the show notes for more details and resources. Thank you, guys.
Scott Dillingham:Looking forward to seeing you next week.