All Forum Posts by: Account Closed

Initially, my first reaction is that at the current occupancy level and your lack of experience, you are going to need a very experienced operator and a very strong financial partner. Deals like this are hard to finance and raising both the equity and the debt are going to be challenging.  

Secondly, mis-management by three different companies tells me that it is either an ownership issue, or something related to the building itself,(ie location, condition, etc.). 70% occupancy is not mis-management, especially in the Charlotte market, it a crime. The only question i have is if the property is owner by an institutional lender, in these cases, the lender may not be in a position to invest in the needed upgrades.

Lastly, if the current ownership is cash strapped, and the property is suffering from a bad reputation, the lease-up will be that much harder and you will need to allow for more marketing and leasing cost.

PM me as we may have an interest.

I whole heartly agree with Ben. assuming that you do most the deferred maintenance when you acquire the property, then Capex is something that you can budget over the next few years with the exception of unexpected repairs. Items like roof, parking lot, exterior maintenance are easy to plan for, HCAV and plumbing usually are surprises but old items should be accounted for. Lastly, tenant/unit related items, while maybe from an IRS pov are capex, carpets, counters, appliances, etc. are always needing repair and replacement. The more units you have, the more this number becomes apparent.

Just general etiquette, applies to scheduled calls, appointments, meetings etc, you should never just no show or not follow-up after failing to do so. Mom raised you better.

How do you feel when you are all set up for an appointment and then you are told at the last minute that the other person is not going to make it? Annoyed? Probably not as annoyed as when it’s a no-show. But if you have a reasonably busy schedule yourself and especially if you have rearranged your other commitments so as to be available, presumably you will be annoyed at being stood up. Or at least irritated.

Having had a no-show yesterday and a last minute cancellation today, I was definitely feeling irritated, even annoyed.

So what would be some etiquette guidance on cancelling an appointment?

Here are a few suggested rules for the etiquette of cancelling appointments.

1. Be an adult and make personal contact, email, text, phone, western union, something, just do not leave that person hanging.

2. If I can call, I’ll do it. Bad new should always be personally delivered.

3. I will not tell the other person how busy I am. We are all busy.

4. I’m ready to fall on my sword. - apologize.

5. For a re-schedule, I’ll find out what suits the other person before I tell them when I am available.

Todd

Try following commercial mortgage yield spreads as a way to gauge mortgage rates. The data is published and is more readily available.  Yield spread do change but are a bit more stable.  The terminology you will hear is "yield curve". Movement in the yield curve are directly related to yield spreads.

Alternatively, you can call several of your banks, and establish what their yield spread is relative to the comparable t-bill. as the t-bill changes you can gauge what that particular bank is likely to charge. 

Comparing the national average spreads to your local lender will give you a good idea if your getting a good deal from your bank. For example if a 10yr mortgage yield spread is 225bp over the 10 yr t-bill and your bank is quoting 300bp, it might be that they are over charging. Keep in mind that for apples to apple comparison, your mortgage credit profile may negatively impact your quoted rates.

For Fannie and Freddie loans, the program is very similar to bank loans and usually is based on a max of 80% ltv and a 1.25 dcr. The trick is that Fannie for example has very strict underwriting reviews regarding expenses so that sometimes their proforma is very different than yours.

 Also, with both Fannie and Freddie, experience is a key factors so that many first time borrowers find it difficult to qualify.  Both have small balance loan programs and these usually have recourse compared to their large loan programs. Rates are risked based so that lower ltvs will have lower rates.

FHA/HUD loans for multifamily are called 223(f) loans and are for multifamily loans that are 5 or more units. There are several other program numbers but all generally fall under the same guidelines for market rate deals

Couple of important points.

1. Acquisition loans are for up to 83% ltv and can cover closing cost and some minor repairs.

2. The process is not for the faint of heart, and usually will take at least 90 days to complete but may be longer.

3. The process is expensive due to extensive third party reports compared to more traditional loans.

4. loans are non recourse and fully amortizing. 

5, Rates are very low but you do have mip.

6. While loans must be processed by a MAP lender, I would highly advise using a mortgage professional familiar with the process since a mistake can be very costly and most MAP lenders will not tell you all the pitfalls until its to late.

7. Loans do require regulatory compliance. In most cases, there are no affordable restrictions but you are subject to annual inspections and controlled owner disbursements.

We do lots of FHA MAP deals and I would be happy to recommend someone in your area. Please PM for more.

I would focus on exit strategy, when buying d-f property. You may be buying cash flow but when you sell, you may be selling dirt.

Define senior housing, there are several levels and are you deed or program restricted? If you are self imposing/marketing to seniors it is different than being under a program.  Some programs restrict all residents and others allow varying age groups. Most restrict any resident living on the property under 50 years old. Some do not even allow grand kids to spend an extended time.

As for your questions, as you might guess, lease up is slow but turn over is very low. Cost are dependent on my comments above, but outside the services, most cost are the same. By service, i am not referring to assisted on nursing care  but rather most senior projects offer a wide range of resident programs.

Value add is really a marketing issue and creation of value based resident amenities. Be sure that your property is suited for seniors if you are looking to convert. ie. 3 bedrooms will not work and second stories are suspect without elevators.

Several reasons:

1. the bank does not want to reward the borrower by allowing him to get the property at a discount. ie the the bank bids 50k and the borrower bids 55k, then the borrower gets the property for less than the original balance owed.

2. most loans have been sold so that they (the lender) have a contractual servicing agreement to bid the balance.

3. many loans have pmi so that the lender gets paid in full. if they bid less, then pmi pays less.

4. the many states have laws that require the lender to bid market, since market is hard to define in a foreclosure, they bid the balance to stay safe.

5. left hand right hand. the legal team does not always get the asset management team on board until after the sale.

6. many states have right to redeem the property, a lower bid means that they can redeem for less.

7.you never know if someone will step up and pay.

8. accounting rules for banks and potential losses are complicated but in general, a lower bid is usually not good for the bank where as a REO can be "fudged".

9. accountability, banks are owned by shareholders, selling below market would be a breach of fiduciary duty to the shareholders. I know, you think that they lose more money but the issue is sticking to the process to avoid the appearance  

10. as a former asset manager, we actually averaged 103% above the balanced owed on our REOs so do not assume that the value is going to be less than the loan, marketing time is critical.

the list goes on.