All Forum Posts by: Jeff Matlock

I would HIGHLY recommend you shop around for your mortgages.  If you properties are in greater Los Angeles the lenders who are good at home mortgages and likely not the same as the lenders that do mulit family loans.  In the lending world 1-4 units is a completely different business than 5+ units.  I would not use the same lender.  Rates today should be below 3.5%.  I closed a loan today with a rate of 3.31%.

Commercial lenders base the lending on the property first to qualify you for the mortgage.  They will not scrutinize your tax returns to the same level and sources of money.  I would expect a commercial mortgage to be much simpler than a residential mortgage but make sure you have someone who knows what they are doing.

I am a commercial mortgage broker in California.  I would expect local and regional banks to have rates around 4.00%.  25 year amortization. 5 or 7 year fixed rate term.

Thank you  @Andrew Campbell  @Jessica Zolotorofe  @Brian Burke  

for the detailed responses, this is far better than I would have imagined!

I agree with all Joel's comments.  This is a construction loan.  I will also add that construction financing is extremely difficult to obtain today.  You need deep pockets, a track record, a fantastic project and a fantastic location.  Most construction financing I am seeing is getting done with debt funds and bridge type lenders, banks are too difficult unless you have an "A" project or have the space pre-leased.

I would definitely work with someone who can help you navigate the CMBS loan documents. Are you saying you will put $11 million down and assume the loans of $29 million? The assumption process can be extremely difficult if you do not have a strong relationship with the master servicer. I am a commercial mortgage broker and I would never recommend anyone get involved in CMBS anything without hiring lawyer who has extensive CMBS experience. It is a very different experience than dealing with a bank, there is no such thing as a simple process with CMBS and I work with them all the time.

I would like to do bigger deals and get into multi-family investing. My wife and I own one single family house but I would prefer to jump to bigger deals as quickly as possible, whether a 6 unit or 20 unit apartment. I am trying to educate myself and get an outside perspective on the process. I am a commercial mortgage broker so the financing part is easy and I know a number of sales brokers that can help me find property. My questions surround how to set up the LLC and the splitting of the profits if I put a minority share of the equity but want to get paid for the work I put in to acquire, organize and asset manage the property.

Where do I learn about profit sharing and how to set up a win/win partnership with friends and family?  Let's say we put in a minority part of the equity 10% or 20% how do I structure it so I get more than my share of the equity invested?

Can anyone give direct examples of their first couple deals they did their first deal with friends and family?

If I am the active partner finding the property and making all the day to day decisions how do I get paid for finding the property and making the asset management decisions? (not day to day property management decisions, we will hire a 3rd party.) 

To warm up friends and family did you put together a "hypothetical package" and say if I find something like this will you invest?  Or did you get the project under contract and then go find the money?

Thanks,

Jeff

James,

Depending on who your lender is I would expect the following terms for 25+ unit multi family property in Phoenix.  This is assuming a stabilized rent roll of 90% occupancy or greater.

The lesser loan dollars of 1.25x Debt Service Coverage Ratio and 75% Loan to value

Recourse with a bank 

Non Recourse with an Agency loan

Rates in the low 4% to mid 4.5% range depending on how long you want the fixed rate

Closing timeline of 45 to 60 Days.

Most lenders will require recourse.

2-3 years of tax returns

Current rent roll

2-3 years of operating statements and the current year to date property operating statements

Resume - Highlighting your real estate experience

Some will pull credit others will not

10% post closing liquidity of the loan amount

Net worth of about 1.5x the loan amount

3 years of tax returns and all K1s

I hope this helps.

Jeff

Diane G.,

I am a commercial mortgage banker here in San Francisco. Low cap rate properties found in the Bay area and Los Angeles will be constrained by the Debt Service Coverage Ratio rather than the loan to value. I am currently working on a loan for the purchase of a 10 unit property in San Francisco. I have quotes from 7 aggressive, apartment specific lenders in the Bay Area and the maximum LTV was 45% one lender could only get to 30% LTV. This was because the high purchase price relative to the NOI giving the very low cap rate below 4%. We often see properties with low cap rates require much greater amount down. Every market is different.

Commercial lenders (5 multi family units and up) will lend on the lesser of 1.15 to 1.30 debt service coverage ratio (depending on the lender) and 70%-80% (Depending on the lender).  Many markets outside SF and LA will have plenty of cash flow and will be constrained by the loan to value restrictions rather than debt coverage.  Multi Family properties should expect to have a 30 year amortization assuming there is a stable rent roll. 

If you are looking to buy a commercial property (5+ multi family units) here in California or nationwide I would be happy to help you navigate the commercial lending process.

Jeff

I am a new investor looking to buy my first property in the Dallas or Fort Worth area.  I would like to stay away from most parts of South Dallas but I like Fort Worth and the areas between Dallas and Fort Worth and North Dallas. 

I am looking for a realtor, please connect if you are interested.

I recently attended Lifestyles Unlimited I am following their model.  We just receieved our preapproval letters and we are atively looking.

We are looking for homes with the following characteristics, please send us anything close that you come across.

3 or 4 Bedrooms

2 bath

2 car garage

Between 1,000 and 3,000 sq. ft.

Price per square foot $78 and below

Built after 1978

Purchase price between $80,000 and $160,000

Only single family homes, we don't want any shared walls

This will probably lead us to fixers that we buy with hard money and rehab and then refinance so it does not have to qualify for conventional financing to start.

I looking forward to connecting.

New member from San Francisco Bay Area.  By day I am a commercial mortgage broker with a national platform. 

I am looking to learn more about syndication and multifamily investing in out of market transactions.  I am passively looking for a partner who would help be the boots on the ground if I could raise the money.