All Forum Posts by: David Hamilton

@Moshe H.It really depends on the lender and on a deal by deal basis. 

I actually have a couple credit unions that don't care at all and will cash out a borrower's entire basis. That came in handy on a recent retail deal that I closed. My borrower bought a vacant former bank branch and re-tenanted into a dental office and Verizon Wireless store. Purchase price was $2,050,000 in 2015 and we just closed a new $2,250,000 10 year fixed at 4.5%

@Darwin Crawford I think what you might be alluding to is the fact that lenders generally don't like to "cash you out." Even if you add a lot of value to the asset, lenders don't like to offer cash-out re-finances (especially within the first year) if the new loan amount is in excess of your total "cost basis" in the property. The lender wants make sure you have skin in the game by maintaining cash equity in the deal. 

I'd be happy to speak with you if you want. 

DH

@James Conaway Generally yes... but it is certainly not a hard and fast rule.

I think I brought this up earlier on the thread. There have been a flood of maturities hitting this year. In markets that have not fully recovered, owners are either having to sell, get bridge and/or mezzanine financing, or put "cash in" just to re-finance the balance. Some owners who are still underwater are just handing back the keys and doing a "deed in lieu" of foreclosure.

I subscribe to a service called Trepp which allows me to track all maturing mortgages. I have not done this but maybe a way to capitalize on this is by purchasing "discounted notes" from the lenders on the distressed assets. Often times you will know which ones are distressed because they will be in "special servicing."

Thanks,

DH

Hi Angela,

Good question. It is interesting... Mobile home park and manufactured housing investing has been "in vogue" for some years now. 

Many of my lenders actually underwrite mobile home park and manufactured housing communities in a similar fashion as multi-family. As long as the majority of the mobile homes are NOT "park owned," you can get fantastic financing. We have done them with banks, credit unions, agencies (freddie/fannie), CMBS, and life insurance companies. The terms can often times be indistinguishable from what you can get on an apartment building -- 75-80% loan to value. Lenders really like this asset class because the operating expenses are so low (similar to self-storage). I would caution you to not include RV Parks in this... those are much more difficult to finance.

Thanks Angela,

DH

@Mike Dymski Hi Mike, 

I generally don't publicize all of the lenders I work with unfortunately. Once I am engaged by a potential borrower to arrange the financing, I reach out to all my various sources on his/her behalf.

I am here to help and hope I have added a lot of value on this forum.... that said I have to protect my day job! Hope you understand.

Thanks again,

DH

@Moshe H. That is a good question. There is a lot of demand for construction/development financing right now especially in markets that have housing shortages (Southern California, Bay Area, etc.). Getting construction financing can be difficult. Having a good track record and a good team around you (architect, general contractor, etc.) are essential to getting approval for financing. You also need to prove to the lender that you are building in an area where there is demand. If you are building multi-family, you need to demonstrate to the lender that there is a need for additional housing (low vacancy) and that rents are stable or going up in the market.
If you are building retail, office or industrial it is going to be much easier to get approval if your project is a "build-to-suit" with a "tenant in tow" rather than a "spec" development. 

Another challenge (look up Basel III) is there have been additional regulatory burdens placed on banks which has tightened their ability to lend.

Ultimately, however, I think getting construction loan approval all comes down to the numbers. You as a borrower need to demonstrate strong liquidity. You also need to finance at least 20-30%+/- of the total construction cost with yours or your investor's cash/equity. You also need to demonstrate that the complete, "as-stabilized" value will be greater than total cost. Two important metrics for construction loans -- loan to cost and loan to stabilized value.

Thanks Moshe,

DH

Hi Mike,

To clarify, I have closed loans with federal credit unions headquartered across the country -- California, Minnesota, Tennessee, and North Carolina to name a few. These federal credit unions will fund loans regardless of the location of BOTH property and borrower.

Hope that helps,

David Hamilton

Brandon,

Yes I certainly have experience in cash-out re-fi's.

I think you would be surprised to know just how little commercial lenders care about the "physical characteristics and condition of the building." Some lenders have a "no metal building" policy. Lenders will also generally require severe deferred maintenance or any environmental issues to be addressed. Short answer... LTV and DCR are king!

Thanks all,

DH

You are right Cody. They are certainly an important source as well.