The Truth About Zero Down Real Estate Investing, DSCR Loans, and Rental Property Financing

Rafik Issabeigi (00:00)
I guess it’s not really the loan more than the people think that this is easy. And you know, it takes effort, it takes time, it takes patience, takes heart, it takes determination. You gotta know what you’re getting into. It takes money. A lot of misconceptions out there are people think that you can purchase a property with zero money down. Is that true? To a certain extent, but not every, it’s not that easy.

Michelle Kesil (01:58)
Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Rafik Issabeigi, who owns a mortgage company supporting real estate investors with loans. So excited to have you here on the show today, Rafik.

Rafik Issabeigi (02:20)
Awesome, I’m excited, thank you.

Michelle Kesil (02:21)
Of course, let’s dive in. So first off, for those not familiar with you and your world, can you share what your main focus is?

Rafik Issabeigi (02:29)
three years has really been investment properties and investors. are mostly builders, but a lot of inexperienced borrowers too. So we deal with first time homeowners as well. So it’s just a wide range of builders, investors, first time homeowners looking to either expand their real estate portfolio or buy their first investment property. again, it’s a wide range of it’s first time buying,

or we have a portfolio, you know, it’s just an opportunity to meet people and figure out what their goals are and point them in the right direction.

Michelle Kesil (03:01)
Awesome. And what markets do you serve?

Rafik Issabeigi (03:05)
We do nationwide, actually. A lot of our success has been in the Michigan, Ohio, Tennessee, Carolinas, Florida, Texas, Tennessee, Pennsylvania. Just to name a few off the top of my head, that’s kind of been just where we see, we feel the volume has been growing. I mean, yeah, I guess that’s kind of where it’s been targeted by default, but.

Nationwide, if the numbers make sense, we’re willing to help consumers.

Michelle Kesil (03:30)
And what do you feel are some main keys of your business that have allowed it to be able to grow and run successfully?

Rafik Issabeigi (03:34)
Okay.

lot of our niche has been that we do smaller loan amounts that most people don’t do so for these investment properties a lot of what consumers are looking for nowadays are like a no-doc type loan so These loans are now called DSCR, which is debt service coverage ratio loans So with that We are again one of the few that can do loan amounts as low as 50,000 so

That’s helped us a lot because most places they’re just looking for bigger ticket items to make bigger money, bigger loan amount, more they can charge. We’re not, that’s not our main focus. Our main focus has been, how can we stand out? Which is okay, well, if we can get somebody to purchase an $80,000 home and they want to hold it, all they need is 20 % down and they can get a DSDR loan because we have a minimum 50,000 loan amount. So I think that’s what’s helped us out a lot because again, most people just…

stay away from those because they can’t make a lot of money. With us, yes, we want to make money, but it’s about helping the consumer. So if we can do the right thing and get them into a property where most lenders stay away from because they’re too greedy, it’s helped us grow our business a lot.

Michelle Kesil (05:38)
Yeah, and what type of investors are you normally working with?

Rafik Issabeigi (05:39)
Thanks.

All kinds, know from beginners who are looking to purchase their firm but first investment property to You know guys that have 20 doors, so it’s just a wide range ⁓ We don’t really have a specific target audience It’s just I guess you can say our specific target audiences. Are you looking to buy an investment home because that’s really what it is

Michelle Kesil (06:07)
And so what does the process look like when an investor wants loan support?

Rafik Issabeigi (06:13)
Yeah, well, it’s just about analyzing the deal ⁓ and making sure the deal makes sense. know, where are you buying? Is it a good market? What’s your rentals? What’s the fair market rent look like? What’s the purchase price if you’re buying? Can you afford a down payment? What is your credit look like? What’s the condition of the property? So we try to analyze and dig in as much as we can. And a lot of times with tools these days online, we have the ability to do that.

So, you know, we’ll, if it’s a property that’s on MLS or it’s on Zillow or Redfin, we’ll take a look at it. We can see the pictures. ⁓ So we just dive in as much as we can getting that information. And then from there, we tell the barber, okay, let’s go ahead and order an inspection and make sure we know what we’re dealing with. And then from there, if at all jives, then, you know, we order an appraisal and we move on.

Michelle Kesil (07:03)
Awesome. And can you explain a little bit about the different types of loan supports you provide?

Rafik Issabeigi (07:09)
Yeah, I mean loan support itself is I mean we’re always there for the borrower as far as supporting them with Holding their hands with what documentation is needed You know a lot of these borrowers want to close in an LLC, which is fine So whether they have an LLC or not We help them create one if they need to and if they have one we just make sure the documents are I Guess correct right are the eyes dotted in T cross

So that goes with analyzing the deal in the beginning. And I don’t know if you asked me what types of loans we offer or just the support.

Michelle Kesil (07:41)
Correct?

Yeah, the loans.

Rafik Issabeigi (07:43)
Yeah, so mean most of them are 30-year fixed if they’re looking for a DSDR loan, if they’re holding the property. So if it’s a purchase and they’re buying it to hold it, then it’s really just a 30-year fixed loan. If it’s a situation where they’re buying to rehab, then that’s a different deal. Those are more bridge loans, 12-month bridge loans where we help them acquire the property and then we give them money to rehab the property.

Those are short 12 month bridge loans with no prepayment penalties, no balloon payments. It gives the borrower enough time to get in there, complete the rehab, and so that they can either sell it or what a lot of borrowers do is the burr method where after they hit a certain after repair value, they refinance it, pull out their money, and go on to the next one.

Michelle Kesil (08:29)
Awesome. And so what types of different strategies like apply for the different people that you work with?

Rafik Issabeigi (08:39)
Well, it’s just, I mean, it’s kind of based on the deal. The strategy is what are the consumer trying to do? If the consumer is trying to hold the property, then the strategy is, do you have enough money for the down payment? Is the rent on the property going to pay for the mortgage? And are you going to be net cash flow positive at the end of the day? So that’s the strategy if you’re buying and holding, is to making sure that at the end of it,

after you pay your principal interest taxes and insurance, are you net cash flow positive at the end of the day? And if you’re fixing and flipping, the strategy is, okay, well, how much are you buying it for? What is your rehab budget? And are you going to be able to get your after repair value so that you can either sell the property and take your profits or refinance and get your money plus a net positive on top of that to then go in

recycle that method and go purchase another.

Michelle Kesil (09:36)
Yeah, and what like misconceptions do most people have with loans or yeah, what like do you think people don’t understand fully?

Rafik Issabeigi (10:22)
I guess it’s not really the loan more than the people think that this is easy. And you know, it takes effort, it takes time, it takes patience, takes heart, it takes determination. You gotta know what you’re getting into. It takes money. A lot of misconceptions out there are people think that you can purchase a property with zero money down. Is that true? To a certain extent, but not every, it’s not that easy.

So I think just when I hear the word misconception, I hear a lot of online gurus pitch that, I purchased this property with zero down. And that’s not always the case. So it takes money to play in this game. And not a lot, because you can buy cheap homes, right? You can buy a 60, 70, 80K home. know, an 80K home at 20 % down is only 16,000. it might be a lot of money to a lot of people, but…

for some not, guess it’s misconceptions are just guiding the client in the right way so they know what they’re getting into and not being misled.

Michelle Kesil (11:21)
Yeah, and what do you normally educate your clients on about loans?

Rafik Issabeigi (11:29)
Just kind of a combination of what we’ve been talking about where it’s, know, hey, look, this is what it’s going to take to qualify. Figuring out what they want to do. If it’s a buy and hold property, then educating them on, well, you’re going to need 20 % down and we’re going to need to run the numbers to make sure your rent covers your mortgage. And if they’re fixing and flipping, it’s going into, well, this is how a fix and flip really works. This is how much you need purchase it.

Making sure we get a scope of work put together so they have accurate rehab costs to then be able to determine if their after repair value is accurate. just an educational tool of if they’re buying and holding there’s that channel and fixing and flipping there’s another channel to make sure they understand all the variables because there are variables and just breaking it down one by one.

Michelle Kesil (12:22)
Yeah, absolutely. And what are like common mistakes that people can get into?

Rafik Issabeigi (12:28)
⁓ Well, again, that kind of depends on the loan and the strategy, but common mistakes are thinking they have enough money when they don’t, ⁓ not understanding the terminology ⁓ that maybe they were misled somewhere else because somebody said they could do it this way, but in reality, that’s not the right way to do it. So it is kind of case by case.

based on the deal, the loan, and the borrower. So a lot of it just boils down to explaining it correctly from the beginning so the borrowers do know what they’re getting into.

Michelle Kesil (13:51)
Yeah, absolutely. And what are you most focused on solving or scaling to next for your business?

Rafik Issabeigi (13:58)
like

We want to grow. We know there is a lot of market share out there, so we’re just trying to grow. We’re bringing on new people. ⁓ We’re doing our own ad campaigns. We’re trying to get some more online exposure. And just turn this into as big of a mortgage company as I can. That’s my goal.

Michelle Kesil (14:19)
Yeah, definitely. And are there any opportunities or things that you’re excited about that you are working on?

Rafik Issabeigi (14:29)
Yeah, mean just in general growing the company I know that’s repetitive but it’s true I mean, I’m excited because we’re in a position where You know the mortgage market is it’s very cutthroat ⁓ but You you have to be strong you have to be a winner and you know, we’re growing in a time where some people are folding so for us it’s just staying committed and doing what’s right for the consumer and

When you stay committed and you do what’s right for the consumer and you’re there and you’re helping, everything else seems to fall in place.

Michelle Kesil (15:03)
Yeah, absolutely. Is there anything that you wish more consumers knew about Morgangelans?

Rafik Issabeigi (15:10)
Yeah, we’re more educated and they knew how things work. It would save us a lot of time from the educational approach, but that’s not the reality. So it just doesn’t work like that. Just like it doesn’t work like that in anything else, right? If some consumer wants to buy air conditioning system, if they don’t understand how an air conditioning system works, they’re going to have questions, right? So.

But yeah, in a perfect world, would be nice if consumers are mortgage experts and all you had to sell was an interest rate, but that’s not really how it works because you’re not going to be successful if all you sell

Michelle Kesil (15:44)
Yeah, that is good advice. Is there anything that investors should know before wanting to work with you or another mortgage loan officer?

Rafik Issabeigi (15:46)
Okay.

Thank you.

think that there’s anything they necessarily need to know because a lot of it’s going to be taught throughout the process. for me, no, because I’m used to having to educate the borrower anyway. So it’s just a matter of building that relationship.

Michelle Kesil (16:14)
Yeah, and are there any types of investors that you don’t work with?

Rafik Issabeigi (16:18)
No, again, we work with anyone. Again, everything is contingent upon the scenario. So all the variables, we have to figure out what’s your credit score, where are you buying, what are you doing, how much money do you have, do you not have money, what’s your goals. So we have to know that about the individual.

Michelle Kesil (16:35)
Yeah, absolutely. Okay, thank you so much for sharing all of that.

Rafik Issabeigi (16:40)
Yeah, for sure. What else? Anything else you want to chat about?

Michelle Kesil (16:45)
Is there anything specific that the investor community should know or understand better? Yeah, happy to let you share.

Rafik Issabeigi (16:51)
Okay.

No, I think we’ve been pretty thorough. guess the last thing I’ll leave off with, again, depending upon your platform and your community, how much they know or don’t know is that, again, we are one of the rare ones that do these lower loan amounts. So as your consumers, your platform grows, they might have difficulty in finding those loans for those 80K purchase prices. So we’re definitely the go-to guys.

how your platform grows, we would love to grow with it and help educate your consumers on what we do and how to help.

Michelle Kesil (17:26)
Perfect. Well, thank you so much. And before we wrap up here, if someone wants to reach out, connect and learn more, where can people find you?

Rafik Issabeigi (17:38)
Yeah, so it’s the lending market. So would be thelendingmarket.com. That has all of our information on there, how to get ahold of us, et cetera. My name is Rafik and I can always be reaching at Rafik, which is R-A-F as in Frank, I-K, [email protected]. So you can email me directly if you want to get ahold of me.

Michelle Kesil (17:58)
Perfect. Appreciate your time and your story. Thank you for being here.

Rafik Issabeigi (18:01)
Yeah, for sure. Thank you. Appreciate it.

Michelle Kesil (18:06)
And for the listeners tuning in, if you got value, make sure you have subscribed. We have more conversations with operators like Rafik who are building real businesses and we’ll see you on the next episode.