All Forum Posts by: Jake Brown

Hi! We recently acquired a 6 unit property in Arizona. It took us 7 weeks to have the current tenants vacate. However, as soon as they vacated, the property was an immediate target for vandalism and break-ins (some appliances stolen, windows broken, etc.).

We have since boarded up all the windows, hired a security guard, and installed a fence. We are planning to do renovations for the next 4-5 weeks on the units, but then want to start leasing them one-by-one.

We don't want to remove the boarded up windows while the property is being waited to be leased to prevent more breaks, but we are worried prospective tenants won't take the unit once they see the boarded up windows. Has anyone dealt with this before? How do you recommend dealing with it?

Hi all, I've been a bit nervous recently since I am closing on a 6 unit multifamily deal which has a 5 year fixed rate of 4.75%. Furthermore, future rate increases are capped to a certain percentage.

As rates are going up over this period, will my commercial lender try as hard as they can to put me in default, so they can exit the loan? Or do they typically stay honest (even though the market rate might be much higher than the current fixed rate)? 

Just want to make sure I won't be forced to sell or payoff this loan. I have no intention of defaulting of course, but the docs give them a lot of power - e.g. if they believe themselves to be insecure, they can call a default.

Thank you!

Hello, I am buying a 6 unit property. I recently received an LOI from a bank for a commercial loan which states that I have to have a global cash flow ratio of 1.25x and a subject property or borrowing entity cash flow ratio of 1.15x.

I am not worried about the global cash flow ratio as we make more than enough W2 income. However, I have a few questions about the 1.15x ratio:

1) What happens if I fall below this ratio? Will the bank recall the entire loan? Does this impact my credit score?

2) Do they even check the ratio if I can make the monthly payments? Our global cash flow will be close 3-4x of the debt service.

3) How do they track and verify expenses? And income? Can I just increase the borrowing entity cash flow by paying expenses directly or signing a lease with myself?

4) Does CapEx affect the 1.15x? For context, I think upon stabilization and rent increases my property ratio will be 1.2x. However, in year 1, it may be lower as we have to turn the units.

I have done several residential multifamily loans, but this is my first commercial multifamily loan so really appreciate your help. If anything else I should know about the risks I am taking, that'd be great.