Welcome to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. Today, I'm doing a livestream, and I'm gonna show you guys The US lending. So for those that don't know, we, are lender in Canada, but we can also lend to Canadians or any other foreign buyer of pretty much any country globally in The United States. So I made this presentation, it is geared towards Canadians, but again, we can lend to any foreign buyer who is interested in purchasing investment properties in The States.
Scott Dillingham:Okay, so we'll get this going. So the beauty of what we have here is we are a one stop shop. We do residential and commercial lending in Canada and The States. Okay. So we've got you covered there.
Scott Dillingham:The beauty of that, I'll get into further, but just know that this is very important. Benefits. Right? So we can lower the fees of your lending if we're working with you in both countries. It's much easier to access equity.
Scott Dillingham:So with one application, we can work with the different lenders. We act as your guide too. And in our whole team, we are investors. So that's the beauty of this too is that we understand what you're trying to do. K.
Scott Dillingham:Now I'm gonna show you a couple of deals that came across our desk just to show you the the vast amount of different lending options we have. So this was a 4,650,000.00 purchase of an office space in Ohio. Okay, so I have the email here from the lender. So now this particular property, and I want to be honest, commercial is tighter, it's harder than residential, but this specific lender was willing to offer 2,250,000.00 to the client to purchase this with a 7% interest rate, which is very good actually, and a twenty five year amortization. And that's without a US partner.
Scott Dillingham:So I think that's very important. There's a lot of commercial investors that I speak to that want to go in The States think that you need a US partner. Obviously having a US partner is going to sweeten the deal. You're going get a higher loan to value with a potentially lower rate. But not everybody has a US partner.
Scott Dillingham:So my recommendation is just get the lending now if you have the capacity to do so. And then as you have that experience, the lenders are willing to lend you more over there. So then we can always refinance and redo the original mortgage in the first place. So again, you buy, take a little bit of a beating rate because the loan to value is quite low, but you get the property. Now you've got the experience you're in the market.
Scott Dillingham:So when you buy property too, you're gonna have much better terms. So again, once that deal completes, then we can go back and redo the first mortgage. So that's kind of the strategy there along with commercial. But we do everything, right? So this is an eight unit.
Scott Dillingham:So it's actually two fourplex properties side by side. We are working on this now. Now I want to show you some of the rates. It's actually a bit outdated too. So originally when I was speaking to this buyer, the rate being offered, it's at the very bottom for those that are watching, was 8.2% over a thirty year term.
Scott Dillingham:Okay. And then the third column on the right is showing the buy down amount. So in The States, you can buy down your interest rate. And we actually have a strategy where we can have the seller do this for you. So you're not paying out of pocket.
Scott Dillingham:But the buy down rate was 7.25 at the time. We have it with lender right now at 6.375. So we've added a ton of different lenders and, we shop around for all of our clients. So the US lender, and again, guys, these are US lenders I'm speaking of here. It's now at 6.375 for the same deal.
Scott Dillingham:So obviously that's awesome for the clients. But even when, you know, we're doing single family properties. So we're doing a condo in Florida. You could tell it's Florida from the palm trees. Okay.
Scott Dillingham:Now this was an Airbnb one. So in this particular case, know, it started at 8.25, the buy down rate is 7 0.25 and it needed 9,000 to buy down. And again, I'm going to touch on that shortly, the buy down. It's very important to know. So financing in The States is easy.
Scott Dillingham:A lot of Canadians think it's hard. Those that speak to their banks, it's still just as hard as applying in Canada. The challenge with the banks financing is that it's meant for your cottage, your second property, right? They want these things in the personal name. They look at your Canadian debt to income ratios to qualify you.
Scott Dillingham:So if that's the product you're looking for and you want to buy, please go to your bank because you're going to get much better options. But the thing is the banks, they don't let you currently set up in the entities from the lenders that we've spoken to. And the other challenge is they don't want rental properties. So our product is specifically geared towards real estate investors. Okay, so here's how easy it is.
Scott Dillingham:You don't need a US visa, which a lot of people think you do. You don't need a US partner. You can do this alone. We don't need to show Canadian income or even American income for that matter. It's based on the property.
Scott Dillingham:Now I will say this, we do have some lenders that if we can prove your income, then potentially you can get lower interest rates. But if you don't want to prove it and it's just based on the cash flow of the property, no problem at all. So again, that goes to point number four. So it's 100% based on the income of the property and you can purchase unlimited rental properties. Okay so there's a few things that you must know.
Scott Dillingham:So your term is your amortization. So in Canada when you pick a five year term it renews and then you renew into another term. In The States they don't do that. So your amortization is a term. So generally speaking investors are getting a thirty year term or a forty year term which is available over there which is nice because you get stronger cash flow with the forty year.
Scott Dillingham:You can also specify when your mortgage is open or closed. So by default, from all the lenders, you're usually open between three to five years. Most of them that we have access to you're open after five and that's by default. So that means you keep your mortgage with this lender for five years and then anytime after that you can break the mortgage and there's no penalty. Okay, so that's really cool.
Scott Dillingham:But you can specify right away how quickly you want your mortgage to be open. So the five year being open after five years is going to give you the very best rates, but you can choose an open after four, open after three, two, one or open from day one. So if it's a property you know you're going to renovate and turn it over and then you want to refinance it, you're going to want to go open free from day one. So that is absolutely an option for any property. So the lenders use a debt coverage ratio to qualify you.
Scott Dillingham:So we input the property's rental income, the purchase price, the mortgage amount with the mortgage payment, and then we subtract hazard insurance. So home insurance, but over there they call it hazard insurance. Now, if the property has an HOA fee, meaning homeowners association fee, kind of like a condo fee over here, we subtract that as well. And then we get what's called your debt coverage ratio. So if the debt coverage ratio was one, that means all the property's income covers all the property's expenses.
Scott Dillingham:We can move forward with that. In fact, we can even move forward with negative DCRs. I don't encourage that for an investor. I think you want to buy with cash flow in mind and in The States, can, right? I know in Canada you can too.
Scott Dillingham:And I love Canada. I still invest here, but this is just additional options for you. Here's some residential options. So you can go with the thirty the forty year term like I mentioned. Rates range from 7.5 to nine as low as the 6.375.
Scott Dillingham:Okay. So the 7.5 to nine, again, is the regular retail pricing. The reason it would go to nine is if say you wanted fully open and you were buying, let's say in New York, because New York, there's a bit of a premium on the rate with most of the lenders. So that would cost you more, but then those figures are with no buy down. Okay, so I haven't even touched on that yet and I will touch on that shortly again on how the seller can pay to get you a lower raise.
Scott Dillingham:The minimum mortgage amount is $75,000 so this is a bit tough for local people I know and local investors because we live in Windsor and Detroit's right across, right? So we're a border city. So in Detroit, can find homes that are much less than this. But the thing is that's the lenders minimum lending. So really you've to be buying something around 110 or higher to be able to tap into this type of lending.
Scott Dillingham:Down payments start between 25% to 30% of the purchase price. You can buy one to eight units under this program. I will be making another episode within the next week touching more on the commercial. Actually, I'm going do multiple episodes about commercial because there's different commercial classes like multifamily and office and industrial. So I'm actually gonna have an episode on each one diving into these things so you can learn.
Scott Dillingham:The total fees, which is also commission ranges from two to 3%. Okay. That's very standard and very common for this lending that's that's open there. Okay. So again, with the term, you can do thirty years principal and interest, or you can select interest only.
Scott Dillingham:Same thing with the forty year. Okay, again I touched on, but by default it's open after five years. And again, you can make it open right away or a one, three, four years. Variables are available. The variable is a bit different.
Scott Dillingham:So in Canada, right, you choose variable and rate from day one, it adjusts. In The States though, you get a lock in period where it doesn't change for that period. And then generally speaking every six months they'll review the market and adjust your rate accordingly after that lock in period. It's a bit different but it's still a great product and it is available. Okay so for rates, So here's how to get the very very best rates.
Scott Dillingham:So you want the debt coverage ratio to be over 1.25%. If it's under you can still get an attractive rate but there's going to be a bit of a premium. Again down payment started 25 but generally speaking if you're doing 40 or more you will get better rates. We have actually a few lenders that at 30 it's the same like 30% down they're giving you the same rate as if you had 40% down. So we've got a couple of those lenders.
Scott Dillingham:So the stronger the credit in The States, the better the rate. Now the reason for that is Canadians, you don't have to have a credit or any foreign buyer for that matter. They're gonna price you as if your credit score is 680. Okay. So what happens is if you build a US credit, they will use that score instead.
Scott Dillingham:And again, that can help you to get better rates. Lending amounts of 150 or greater also equals better rates and your location can affect rates like I touched on with New York, right? New York's higher in price than say Texas, They have a bit of a premium so it is what it is. Mortgage size again, some of this I've touched on but the minimum lending amount is 75,000. The minimum at a lot of lenders is a 100,000.
Scott Dillingham:Okay, so keep that in mind. If you do buy and you're trying to get something as low as 75, I put on here with one lender. We've actually onboarded with more lenders since I made this presentation. It's maybe about two to three weeks old. That's why the rate on the eight unit dropped as well because things have come down a bit.
Scott Dillingham:So now we have three lenders that can go a minimum of 75, but you're not accessing all of the lenders, So there's less likelihood that we can shop around for you. So there's fewer lenders, but at a 100,000 or above, that's kind of the minimum of all lenders. Then we can really shop around for you. The rate tiers, so at a 100,000, here's your rate, 125, here's your rate and again, above 150, here's your rate and it gets lower again the higher the mortgage amount is. Now the lenders they do avoid properties with deferred maintenance.
Scott Dillingham:So that is the catch to this program right? You're from Canada or any other country. You could be from Japan and want to tap into this type of lending and it's available for you. But if you are from a foreign country, they are not very keen on deferred maintenance properties because how can you fix that? How can you see that it has the deferred maintenance when you live so far away?
Scott Dillingham:Now obviously some people are going be like, Oh, well I have a property manager, but we all know that not all property managers are created equal, right? So lenders are just very, this is a risk to them. Now we do have flipping products where they don't care about that. So generally speaking, the lenders I'm speaking about right now are more of the buy and hold lenders. Okay.
Scott Dillingham:So the buy and hold lenders don't like the deferred maintenance. Flipping lenders love it. That's what they're in the business for. So if you want to buy a property that needs this type of effort and work into it, then what we'll do is we'll use the flipping lender as lender one, get you all set up and then we'll convert you to a buy and hold much like we would in Canada too because the major banks, they don't like properties with a lot of deferred maintenance in Canada either. And then again, blanket mortgages are available so we can do complete portfolio loans which is pretty cool.
Scott Dillingham:And a portfolio loan for those that are unaware is you can literally buy a group of 30 properties. So here's the purchase price, 30 properties, let's go. We can do that in The States. So down payments again minimum is 25 down, 30 to get the best rates, 90% of the lenders want the 30% down so I set that as your target. You must prove sixty day history of funds.
Scott Dillingham:In Canada it's ninety days. Okay so the fact that it's sixty days over there is a little bit easier but they have to be held in a US account thirty days prior to closing. So keep that in mind because you don't want to get yourself in trouble. Now for units. So most of the lenders are only doing one to four.
Scott Dillingham:There's only a handful that we have that will go up to eight actually, we just onboarded one today who will go up to nine. So we're getting the details about that before we start promoting it. But there's, again, most lenders want one to four units. Okay. So broker compfees.
Scott Dillingham:Okay. So you're going to pay two to 3%, which is the average commission in The States for this type of product. Okay. Now, some of the lenders that we have, we can add these fees to the lending amount. So you're not necessarily paying them out of pocket.
Scott Dillingham:Okay. Now some lenders have no fee at all. So you have to be careful as an investor because I've priced these for our clients and it's not good. So if you're going to accept a higher rate with no fee, you end up the breakevens probably a year, maybe a year and a half. And then after that, you're overpaying year over year over year over year because you've accepted a much higher interest rate, which is generally 1% to 2% higher.
Scott Dillingham:So it's always better in every scenario that I've ever run to pay the fee upfront to get the very best rate that you can right out of the gate. Okay. And then you want to get the seller to pay the fee. So again, I'm going to touch on that in just a second here. So how can you get the seller to pay the fee and to buy down your raise?
Scott Dillingham:So in The States, can do what's called a seller credit. In Canada technically you can do it but what happens is in Canada the lenders rebate the purchase price. So let's say you bought a home for $300,000 and you had a $20,000 seller credit. In Canada the lenders will say okay well your purchase price is only $280 then and so they'll finance $280 right so if you're doing 5% down or 20% down it's based on that $2.80 Where in The States you can actually increase the purchase price and have the seller give you credits. So literally you can finance the fees if you want.
Scott Dillingham:But then those seller credits that I was telling you about where you can pay cash to lower your mortgage rate that can come from the seller. So it's like cash on closing from the seller. So it's super cool. I encourage everybody who's making a purchase over there to ask for a seller credit. And I've run the numbers for every one of our clients.
Scott Dillingham:Is always better to have a seller credit cash on closing rate and lower your mortgage rate than it is to take that same dollar amount from the seller and lower the purchase price. So let's stick to that $300,000 purchase price with a 20 ks credit. Okay let's just say if you're going to take $20,000 off the purchase price you might save $20 to $30 a month on your payment But if you can lower your rate 1% or even 1.5% because of the seller credit, you're saving $100 maybe $150 a month on the payment so it's a much bigger difference but then you're also saving thousands of dollars of interest over the life of the mortgage so it's just a way better option. If the seller is not willing to give you a lower purchase price and a seller credit then get a seller credit. And if they say no, because there's so much competition, they're not selling it below a certain price, then offer them a higher purchase price with the seller credit.
Scott Dillingham:Okay? So again it can be used to buy down rates. It can go towards the bucket for the fees and closing costs that type of thing. And again I touched on it but seller credit is better than the lower purchase price. Okay so here is the process.
Scott Dillingham:So I am not an accountant and I recommend that you speak to one, but from my clients they have told me that it is better for them to set up an entity in The States to purchase. Most of the lenders want you to buy in an entity. We do have some that we can close in the personal name. So we can do both, okay? But I'm being told there's no double taxation and there's other benefits, There's liability protection and different things like that.
Scott Dillingham:But again, not my specialty I do the lending speak to your accountant see what's best for you but generally speaking that's step one is determining the structure and by the way I can introduce you to all of our connections the link to contact me is going to be in the show notes of this show where you can book a strategy call with my team. We will share all of our contacts with you to help make this journey a success for you. Okay. Now after the entities the bank account right because you need to show the money in a bank account before closing. You also need a spot where you can collect the rents.
Scott Dillingham:Okay. So you got to get the bank account and generally speaking, you need the entity first. It's It's easier to get the entity and set up a bank account than set up a bank account in The States in your personal name. Both are possible. I'm just saying again from what I've been told from the bankers and I've went through this whole process myself setting up the entity, setting up The US bank account and I could tell you it was pretty seamless having the entity set up.
Scott Dillingham:Okay and then there's either the done for you path or there's the do it yourself path. So we work with a group called SHARE and SHARE they hold your hand, they can actually help you set up the entity, work with you on getting the bank accounts, They even find the properties, install property management for you, fully renovate them. So it's like a turnkey solution. Okay. I will introduce you to all of my contacts there.
Scott Dillingham:If you wanna chat with them and see if it makes the most sense for you to do that. Now they do specifically focus on single family properties. Their pitch is five to seven caps. That's what I see them advertise and it is available. Now they will work with you if you have a specific location or something that you really like, they will try to organize that for you and find some type of off market deal and orchestrate that for you.
Scott Dillingham:So really great contacts, but then there's also the do it yourself method. Now the do it yourself method, I can still see with my team, refer you to professionals, realtors, things like that, that we know, But that's up to you, right? You'd have to interview them, see what makes the most sense, who you want to work with if there's a connection, and if there is then obviously move forward at that point. And then lastly, once you find the property, you review the terms, we fill out any forms and supply any documents the lenders need, and then we close. Okay.
Scott Dillingham:So I am oversimplifying. There is multiple steps within each one of these steps, but it's not hard either. It's just, it's probably cumbersome the very first time because there's going to be terminology in things you've never heard of. Everything's different over there. Like the one lender today, they asked for an LOE for the customer.
Scott Dillingham:In Canada, that means letter of employment. Over there it was letter of explanation. So they wanted the investor to explain how they were moving out of their current home and how they're renting it out, because this program is specifically for investors. We're going get that. But so anyways, there can be confusion, right?
Scott Dillingham:Cause they're using a lot of the acronyms that we use, but over here, they need different things than over there. So again, we can act as your guide. We'll help you through all of that. Okay, so here are some of the new products. So we've got fix and flips for foreign buyers.
Scott Dillingham:So that was something we really struggled with when we first started in The States. Most lenders do not want to work with foreign buyers, but we got them. We have lines of credit for experienced flippers. So super cool product where you can get a line of credit that is worth up to three to four times your project's value. So then you can do multiple flips at a time.
Scott Dillingham:So super cool. Obviously there's terms and conditions. So if that's a product you're interested in, book a strategy call with someone on my team, we'll offer you a free strategy call. Commercial flips. We have lenders where we can flip up to eight units and just yeah, it's incredible, right?
Scott Dillingham:It's not just single family homes. And we're adding more lenders weekly it almost feels like daily because we're just adding so much and the reason we're adding so many different lenders is we just want to have the most diverse best priced product for any foreign buyer that wants to buy in The States. That is specifically our niche. And what we found is investors that go to a broker in The States, that broker will have a product or two for the Canadian or any other foreigner to move forward. But they're in America, they're used to working with Americans.
Scott Dillingham:So for us, we're used to work with foreign buyers because this is where we're at. So I find our lender pool is very, very diverse compared to a broker that's boots on the ground in The States. Now obviously if you're in America and you're trying to buy your own home to move into, that would be where a U. S. Broker has the edge above us because we were not getting into the homeowner space over there.
Scott Dillingham:We're not just, we're doing investors only. So keep that in mind, as you shop around the hottest markets are Ohio, Florida, and Texas from our clients that have purchased. There's so many others like today, we're literally submitting a deal today in Tennessee, right? So we have clients that buy everywhere, but that if I was to add all the properties up that everyone's buying, those are the three hot spots. Again, if you want to speak to a realtor, get market fundamentals, just like anything that you would do over here.
Scott Dillingham:Okay. So literally take everything that I'm saying with a grain of salt and research everything for yourself to make sure you're making the most educated decision. Okay. So I think that that is it. So that is the end of the presentation.
Scott Dillingham:So if you're interested in investing in The States and you're looking for more options, just know there are options out there. It's very easy to get started. It's really not complicated. We're more than willing to help. So we have two things.
Scott Dillingham:Obviously in the show notes, again, already mentioned it, but you can book a strategy call with my team and then we can answer any questions that you have related to this. But also there's a link to the investors hub. I recommend everybody just join that. We have all these different webinars where we're covering this. In fact, at the time of this recording, it's close to the May, early June.
Scott Dillingham:We have an. A lady there who helps Canadians, set up visas so they can actually have a visa and live in The States through real estate investing. So we're just doing all kinds of really cool things. The hub is free guys. Just join it.
Scott Dillingham:You can access all these events. You can find off market properties. If you are a realtor, can post your properties in there as well. We do filter them to a point where we want to make sure there is not just junk. So as an investor, know they are being filtered, which is awesome.
Scott Dillingham:But we have a Canadian real estate investing course. The US one is going to be launching very, very shortly. It's a really cool place to hang out. So anyways, I hope you enjoyed today's show and I look forward to chatting with you guys shortly.