All Forum Posts by: Brent Shryock

Dont forget to underwrite to new taxes based on new value.  Just my 2 cents.  

If you are planning to "add Value" and recapture some equity once seasoning occurs, then most lenders will want to see at least 2 years of seasoning to get to the new value.  Under 2 years, the lender typically will look at (Purchase price Plus your additional capital in improvements) as your total cost basis and lend on that number.  

I would start looking for lenders at least 6 months prior to your term ending.  This will give you cushion if there are market shifts and allow you time to find suitable lenders to take it down for you.  

@Spencer Gray makes a great point. Regardless of "cap" rate, if you are looking at financing the property your lender will underwrite the deal based on actual numbers. Lower the cap rate the higher the chance your deal is going to be debt service constrained and require more equity in the deal, which in turn reduces your IRR. I see more times than not the cap rate is "inflated" due to lower expenses to induce more buyers. When we get actually underwriting the deal it is a lower cap rate based on actual numbers.

Typically I see 2 years as pretty standard from my lending partners. They are also getting more strict on this and some are requiring longer periods before allowing a true LTV not LTC constrained cash out. The reason is they do not want to cash out (on value not cost) somebody that has not created "value" and is trying to cash out because they are getting a cap rate lower based on nothing more than the hot market.

Fannie and  Freddie SMall balance programs  do 10/30s and other variations of 30 yr ams.  5+ units contiguous sites.  

Most banks and CUs will limit am to 25.

On 5+ units, Take your NOI, divide it by 1.25. Divide by 12. Put that number in payment. Put in interest rate, and am and solve for PV. That will give you the loan amount that you can expect on the property based on actual numbers. My guess It's not cash flowing in your numbers because you are Probably taking the purchase price and doing LTV ratios. In reality, You are probably looking at 50%-60% LTVs in those markets.

My 2 cents, You can probably do better than 15 year am.  That is short.  We are seeing bank/credit unions at 20 at least and 25 on a case by case basis.   Also you may be able to negotiate adjustable spread down as well.  Keep shopping.  

Amen @Cassandra Sampson.  

Agencies won’t need tax returns, banks will.  When you go the agency route they underwrite the asset first.  Most small balance programs minimum loan is 1m.  You do need to show 60 days bank statements with the cash liquidity requirement.

I have helped sfr operators get financing through the agencies on small Multifamily deals.  You are not dreaming.  Like @Greg Dickerson said you need some liquidity and networth of Loan amount.