All Forum Posts by: James Eng

@Matt Donker I would start getting on lists for multifamily listing brokers as well.  Start reviewing deals that are currently listed for sale.  Some of the larger multifamily brokers in Houston are: ARA, Berkadia, HFF, and Transwestern. 

@Brian Adams

On the refinance, do you plan on using a Fannie Mae Non-recourse loan or CMBS? If not one of these, what loan execution were you thinking of using?

Appreciate you sharing your success!

@Kamlesh Thakkar

In my experience, it is best to figure out your financial situation and determine what your real estate investment strategy is going to be (buy and hold, fix and flip, single family, multi-family, etc..).  Then find a mentor doing what you want to do and learn from them so that you can meet your goals.

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Ashwani K.

A couple comments:

1) NOI is based on the property only and should not include your mortgage payments. It should just be property revenue - property expenses.

2) In terms of calculating your NOI:

a) Management Fee: You should still use a management fee (5-10% properties under 50 units, 3-4% over 100 units) as investors and banks will include a property management fee when underwriting the transaction.  

b) Capital Reserves: You should also include a capital reserve, $300/unit is typical for a 1970's-1980's property depending on when it was last renovated.

c) Real Estate Taxes: Check the current assessment at the tax appraisal website and make sure to use at least 75% of your purchase price when calculating future real estate taxes

After making these adjustments, you can figure out the correct NOI and thus the correct cap rate.

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Gil Estupinan

In Texas, the county typically looks at sales from the last 6 months in the same neighborhood or within a 1-2 mile radius of the home.  For example, the 2015 assessed value is based on sales from July 2014-Dec 31, 2014.  

The worse case scenario is the purchase price because if it is assessed for more, you can use your contract in 2016 tax protest.

To be conservative I think 80% of purchase price is reasonable.  As a bank on the commercial side, we typically use 75-80% of purchase price because if we foreclose on the property we at least have taxes assessed at our new basis (ie. loan amount).  

@Charles Tucker

One thing to consider is that it doesn't significantly more capital to get started in multifamily (5 units and above).  You just have to understand the debt options available and find the right partners to put the deals together.

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Charlie Claxton

Have you looked at agency debt (Fannie, Freddie), life insurance, or CMBS for long-term debt after the property is stabilized (need 90% occupancy for 90 days for Fannie)? I'm assuming the land contract will be gone once the new debt is put on the property. These will get you max loan dollars (75-80% LTV), 30 yr amortization and low interest rates.

Anyone have any recommended lenders for a multifamily (100+ units) in Angleton, TX (South of Houston on the way to Freeport)?.  Needs rehab of close to 7-8k/unit.

One of the advantages of investing in multifamily real estate is the ability to get non-recourse loans on investment properties through Fannie Mae.  These loans are fixed long-term (5,7,10,12) loans with 30 year amortization at about 3.00% above the corresponding treasury rate.  The question I often get is how to I qualify for non-recourse Fannie Mae loans?  There are 3 ways I know of for qualifying:

1) Sign a recourse loan with a local or regional bank and have at least 2 years of ownership and management experience (5+ units).

2) Sign as a key principal (passive) with someone who has Fannie Mae experience and will be the managing member.   

3) Have someone with Fannie Mae experience sign as a KP on your deal if you want to be the general partner.

A couple questions:

Does anyone know of any other ways of qualifying for non-recourse Fannie Mae?  

Does anyone have experience with Fannie Mae DUS lenders?  Which ones do they prefer working with?

Are there any other options for non-recourse debt on multifamily besides Fannie?

@Gustavo Vargas 

The market in TX for multifamily is very competitive right now.  Most of these deals are still marketed by brokers so they can secure the highest price for the seller.  Start building relationships with lenders, listing brokers, and property managers so that you can try to secure a deal off-market.