All Forum Posts by: Matt Hinton

That sounds pretty ideal, Bill. I'm going to start hunting and see what's out there.. If I could secure something like that, I don't imagine I would hesitate pulling the trigger. Congratulations on your acquisition.

Wow - 4.25% for 7 years sounds very competitive. Is that with a local lender? Bill, I have had a very positive experience with Farmers Bank of Milton; they will sometimes work up a 30 year ammortization with a 7 year balloon. You will necessarily pay a higher rate, but it definitely boosts cash flow. They will lend in Shelby, Oldham, Trimble, and east Jefferson counties. Tell them Matt sent you :)

@Joel Owens - am I not out of line for trying to target a 7 to 9 cap with investment grade tenant with some good years remaining in force and with good provisions like you mentioned in the form of rent bumps to offset inflation and mitigate interest shock? Do such beasts exist? Thanks for all the info - you need to convince the guys to have you back for an NNN exclusive podcast. It would no doubt be well received.

Joel, I had that deal evaluated by a local lender a little over 15 months ago that could lock in 3.59 for 15 years (this is precisely why I have heartburn over losing it), but I did not heavily shop it because I found a great newer multifamily below replacement cost shortly after being rejected by the bank on the retail strip. I was prepared to put 20% down, but they would have needed 40-50 down because the other side only had a letter of intent from an Asian nail salon (local operator/limited experience or data to go on). I did not have the capital necessary to get to that LTV, nor would I have been as interested with that much less leverage in the deal.

I'm not necessarily chasing double digit cap rates either; I would expect a premium for the reduced responsibilities. It just seems that the local multifamily market (decent areas) is frothy enough to the point that I could do as @Bill W did, and chase out of state NNN for comparable cap rates with fewer headaches and better quality tenants. I just don't know enough about the financing options that could provide a hedge against future interest rate volatility because I suspect for a leveraged buyer, that has to be a significant concern with an investment like this.

Thanks for the feedback Bill - I was also thinking Southeast (TN, GA, AL)

Elizabeth C. , thanks for the encouragement; I'm sure you're right considering you are taking on something far more management intensive remotely. Joel Owens - I've been seeing so little in the way of inventory for multi-family (at least in the areas that I would be comfortable with), and the cap rates have been dwindling down to single digits. These properties are so hot that sellers in many cases are getting more than the asking price. I just can't get excited about Orange County style rent/value ratios here in Louisville, Ky. I did listen to that podcast that you were featured on, and I was interested to hear what you had to say regarding NNN. The first offer I made was for a NNN retail strip that had a regional restaurant franchisee as one tenant with many years left in the lease and a vacancy where a check cashing joint had gone dark . The rent from the restaurant alone would have covered the debt service but I was unable to get financing because the lender considered it "destabilized" at 50% occupancy. It was sweet - newer construction with a Starbucks anchor adjacent. It's my white whale that keeps me up at nights. Thanks for your insights and assistance. I'll be in touch. I'd like to hear what you know/think about Chatanooga.

I should add a caveat to my previous question. This is assuming the landlord has already done his due diligence and has a clear picture of the fundamentals of the out-of-town real estate market where he chooses to invest and that the location is solid. Sorry - afterthought.

I would like to see what others thought about the wisdom/perils of investing out of area for NNN lease type investments. Assuming a landlord could secure an investment grade tenant for a long term lease (true NNN with strong guarantee), conventional wisdom seems to suggest it should not matter too much if the property was several states away. I presently am exclusively a multifamily investor in my immediate geographic region, but cap rates have compressed so much in multifamily and nothing too compelling has come on line locally. I would like to consider adding a NNN lease to my portfolio and would just like to see if there other variables that I haven't considered regarding the out of state question. Thanks.

Joel Owens, thanks for your detailed assessment. Your hypothetical property is eerily similar to the subject property in question. It is a 28 plex that is being sold for@ $12,000/door. I do estimate $4,000 deferred maintenance per door. The average rent is $625, with landlord paying utilities (it is separately metered, though).

The bank that owns it is a state chartered bank; I saw in a local business publication that they are no longer examined/regulated by the FDIC, and are now the first Louisville bank to be a member of the St. Louis fed. I'm a little unclear as to how that impacts their position on handling REO. I know they have not historically been interested in financing such deals, but this could change things?

Do you think with 50% LTV hard money would be an option if banks give it a pass? As I run through scenarios, it seems that if it performs only half as well as expected, it's still very compelling.

Not sure what happened to my cut/paste slop, but it is supposed to say: and I estimate that it is currently <50% occupied and I don't...

grrr

I realize in advance that the correct answer to the question that I have is probably "it depends," but I will give it the old college try. On average, what do most of the smaller, "investor friendly banks" need in terms of occupancy rates to lend on multi-family?

A little information on the property itself:

The building in question is bank-owned and has quite a bit of deferred maintenance issues but also a lot of upside (newer roof, plumbing, electric). The bank has hired a new property management company to get rid of some of the problem tenants, and I estimate that it is currently t have the capital necessary to make a cash offer. Any input would be appreciated.

Bryan, I have worked in retail banking where I did originate mortgage loans; those were the days leading up to the crisis when a pulse was all that was necessary for pre approval. I worked a while originating mortgages for a broker while also using my real estate sales associate license to assist clients as a buyer agent while simultaneously working the financing side. This is my first foray into REI, and I'm finally practicing what I preached all those years.

I have listened to the podcast. I've really immersed myself in the podcast world as I have a nearly hour commute to work, and while I love listening to old Allman Brothers tunes as much as the next guy, I have really been learning a lot for several podcasts including Jason Hartman, Real Estate Guys, and Biggerpockets. Do you have recommendations for others?