blackstone financing 5+ homes commercial loans

[Scott W.]

1st they gobbled up homes by the truckloads in certain markets (bigger homes, which don't cash flow that well but research shows vacancies are at 4-5 years) and now introduce loans to landlords to further flood the market.

I ask myself, "why would they want to help their rental competition?" it just doesn't makes sense unless they're doing this rental thing as a short-term (3-5 years) gig.

and we also know, they are dumping 20% of their inventory on the west coast where last year's appreciation was phenomenal.

quite a few of their homes are near where I live...the taxes alone are $9k a year. the rents are anywhere from $1700-$2k.

none of this makes sense...so my only reasoning is, they're trying to boost the appreciation by further tightening inventory.

CNBC doesn't comment this might be happening when they broadcasted it. am I off base here or are they actually helping the recovery?

http://www.cnbc.com/id/101276543

[Mike H.]

Here's a little insight on their loan program - or at least the one that covers 500k to 3mil dollar loans.

I was curious to see if this financing was going to be worthwhile to pursue or not. Figured, since it was so easy for them to get money, maybe it would be easy for us too. Not a chance.

I put in for what they would probably consider a smaller loan.
Total value of 8 homes came to 1.07 million.
I was looking at roughly 65% to 68% LTV.

I filled out a sheet with the properties, their estimate ARV, and the rents. And that was about it. No personal information on myself at all. No amounts owed or anything either. Very strange. I've never seen any application process like it ever.

Got the term sheet back today. Here were their terms.
Keep in mind, that one of the reasons they had piqued my interest was because their loans were amortized over 30 years. Most of my commercial loans are at 20 years. Anyway, here is what they came back at - and see if this isn't going to be pain.

INTEREST RATE:

For the 5 year loan amortized over 30, the interest rate was 6.2%.
For the 10 year loan amort over 30, the rate was 6.7%.

So 5 year loan, rate wasn't terrible. Wasn't great either. But at least its not alt prime rate or something crazy.

Here's where things got real interesting.

UP FRONT PAYMENT REQUIRED
Check these requirements out:
1) They wanted 10,100 up front - for "out of pocket expenses". It was to come in 2 payments. 5k and 5,100.

Now I'm assuming this means things like appraisals and the like. But, for 8 houses, this would have to be one heck of a costly appraisal company. :-)
What other charges are they throwing in there? Term sheet is too vague to tell. Just refers to them as "out of Pocket expenses".

PROFESSIONAL PROPERTY MANAGER REQUIRED

The properties in this loan must be managed by a professionally licensed property manager. Great. There goes 10% of my rents right there. Not to mention the lease-up fees as well. I guess some landlords are professionally licensed property managers so this may not be an issue for them. But it clearly wouldn't work for us smaller fish (I'm at 23 and I am definitely smaller fish to them).

ESCROW ACCOUNTS
They want all the rent for the houses to go into an account that they have access to and they want security deposits in a separate account and they want reserves and capital expenses to go into yet another separate account.

Add in another 5% just to manage all the separate accounts they're asking for. And then you have to give them access to them as well. I've never seen anything like it from any lender I've ever worked with. Even on the blanket loan I did for 3 of my houses.

OTHER

Not that big but they also wanted all the taxes, insurance, etc, in escrow accounts that they would maintain. And they wanted loss of rents out to a year. Normally I just do 6 months. I figure I could pretty much get a house built in 6 months or so. Worst case is maybe I have to eat 2 or 3 months. But 12 months seems excessive.

Still, these are some very interesting terms to say the least. For me, its simply a non-starter. The fact that they're wanting 10k up front to do the loan is ridiculous. I don't mind paying the appraisal fees out of pocket as an up front cost. But there is no way I'm paying any broker or lender any up front fee for anything beyond that.

I've paid the "application" or "doc prep" fees a few times on some blanket loan apps in the past that never made it all the way through. They're just not dependable enough.

This company actually seems like a joke to me at this point. Maybe some of the larger operations would find these terms acceptable. But for the smaller investors like myself, I just don't see it being worth all the headache and aggravation considering the additional costs its going to add (licensed prop manager and all the accounts). And the interest rate is worse than any other local lender I've gone with to date.

So, for me, this loan product is simply unusable in its present format.

Until they come back down to earth, I just don't see it being a good fit for me or, likely, any other small investor either.