All Forum Posts by: Andrew Beauchemin

I will 2nd @Hadar Orkibi's comment; you should vary your lending sources.  For a long term buy & hold on a stabilized property, banks have a tough time competing with Agency debt.  I received a quote on a multifamily property today at 5/7/10 years, 30 year am, 5.75 - 6%. (that treasury keeps climbing!!)

This is for commercial, 5+ units, $1M+

@Joseph Billow I like the idea of a 30 year am with no prepayment penalties, overpay as much as you like.

@Shane Jeanfreau Assuming the seller financing terms are going to be better than most lenders', I would try to stay in the seller-finance deal as long as possible while you build up equity.  You will need some history of stabilized cash flow to get the best rates from a traditional lender.  A general rule of thumb is 90 days at 90% occupied, but again, I would hold on to the seller finance as long as possible.

If you are buying out the seller completely when you do eventually refi, yes, you will need to have some equity (whether that's your own, or another private investor / partner).  The lowest amount I've seen is 20%, your best bet being an Agency loan.  Run your cash flow numbers over the next few years and see how long it takes you to hit 20% in equity (don't forget transaction costs), and there is your target date for the refinance.

A 4-plex is considered a residential loan vs. a commercial loan for your 40-unit, which are structured very different and won't have as many low/no money down options.

Sounds like a great opportunity!  Congrats on finding this one.

@Eric Lewis I don't have any experience or knowledge of CLD, but a word of advice is that though the interest rate may be lower, I can guarantee they are making their money back somewhere else.  It would be worth it to have a professional / consultant take a look over your terms and make sure you aren't locking yourself into a potentially unfavorable agreement.

@Corey Tobin I've worked with ARA Newmark on larger multifamily, PM me and I'll forward over my contact's info.

@Jon Holdman Generally on any Agency loan, the combined net worth of key principals (anyone with over 20% equity) will need to be greater than the loan amount.

Yep, you are correct, Yield Maintenance is a type of pre-payment penalty (as opposed to the 'Step-Down' structure)

@Gregory Ballard, it's uncommon (Usually I will see 5, 7 10 year terms), but it is possible to get a 30 year fixed rate from Fannie. Your property will most likely need to be in top condition, in a primary market, and have great cash flow history.

I just got a quote from an agency Lender yesterday: 80% LTV, 30 year fixed rate at 5.38% (Treasury + 230bps), 30 yr AM, 15 year Yield Maintenance, 1.25X DSCR. 5-50 units, $2-10MM range.

Hi All,

Is there a meeting this week?  I'd like to join if there is room!

@Ahmed Souissi Fannie and Freddie look about the same right now, but you can probably get more leverage from Fannie (80% vs 75%). Freddie will also probably require an interest rate CAP fee.

Definitely still get quotes from both.  

@Ahmed Souissi I would agree that Fannie SBL is probably your best option, based on just the info in your post.

At 80% LTV on a 10 yr fixed rate, rate will probably be high 4%'s / low 5%'s. (~215-220bps spread over the 10yr treasury). DSCR should be around 1.25-1.30x. 30 amo. Prepay on fixed rate will most likely be some sort of Yield Maintenance.

If you go for a 10yr hybrid ARM, you can probably get a step-down prepayment vs. yield maintenance.

I'd still get some quotes from other lending sources, but for a stabilized multifamily long term hold, Fannie is tough to beat.

Andrew