All Forum Posts by: Kenneth Mendonca

@Josh Oaten can you elaborate on how you financed the deal? Would love to hear all about it.

What has helped me and my borrowers tremendously is getting your financing lined up ASAP. If you can get real-time financing options while your underwrite/pre-underwrite/screen your deals you'll be leaps ahead of the competition. More often than not the lending process is somewhat like this:

- Wait "24-48 hours" for your broker and/or lender to get you a quote that is most definitely juiced with teaser rates and unobtainable proceeds. 

- Wait 2-3 days for some junior analyst 2-3 days to pull comps (which the lender won't even use) which is simply unacceptable

- Wait 1-2 more days to figure out that your lender requires X% equity to enter the X market.

By that time, the amazing deal you found could already be lost.

tldr; If you can screen your deals with intelligent market insights, real-time financing options, and support your expenses with up to date comps with ACTUAL financed comps you'll be lightyears ahead.

@Kelly A.

As others have mentioned, things get a little more complicated with commercial loans. Fortunately, there's a ton of education out there on CRE debt especially when it comes to programs like Freddie SBL or Fannie Mae Small Loans. As a lender myself, I'm seeing rates in the mid 3's for under $7.5M. There are a ton of interest only options too that could be very attractive depending on your use case.

I'm also seeing a 30 year fixed FHA loan for under 3% still.

Are you leaning towards recourse or non-recourse financing?

Whichever route you choose, make sure to keep your lender honest! Get their underwriting ASAP, make sure their comps are fact-based (e.g. not dependent on the appraisers mood), ensure their expenses are within the reasonable variance of recent transactions, and most importantly keep their delivery timeframes short. They say 24-48 hours, but often it takes 1 week for some junior analyst to give you a quote.

More often than not, by the time you get the term sheet, the property is gone! If only there was a better way! 

We all know lenders can be shady especially when it comes to re-trades, last minute bait-n-switches, unexpected closing costs, or the infamous "we'll get back to you in 24-48 hours" line. 

What has been your worst lender experience when financing a multifamily (specifically 5+ units) project? 

This is a great question! I'd like to offer a different approach than most people suggest.

1. How do lenders view the market?
2. Are the agencies (Fannie, Freddie, FHA) lending there or are they running away?
3. What market tier have the agencies classified _______ market as? Do you know how this impacts your loan?
4. How much equity will I require to enter the _______ market?
5. What are the typical expense ratios in the _______ market?
6. What will my cash on cash return be if i invest in the _______ market?

The list goes on and on. It's a great starting point to get BiggerPocket member opinions but at the end of the day, you'll need to crunch the numbers and hope your lender can support the valuation that the data supports! (e.g. comps, recently closed transactions, agency market ratings, etc). Ultimately, your financing will be the most important driver in the transaction. Make sure your lender can execute when you need them!

tldr; lenders will always underwrite to a conservative value, use data to drive decisions and valuations when looking for a market to buy into!

Echoing what others have said! If your lender is taking more than a reasonable time to respond, it's because they don't see value in the transaction unfortunately. The loan process can be cumbersome and tedious, finding a lender that's responsive, transparent and honest can be tough especially when these people are only incentivized to help on larger deals.

Fannie & Freddie Market Tiers! Knowing where the agencies are increasing their lending has helped me increase my cash on cash returns!

@Freddie Williams This is a great question! How about the _______ market? I would like to offer a different approach to the opinions suggested above. Ask yourself:

1. 1. How do lenders view the market?
2. 2. Are the GSE agencies (Fannie, Freddie, FHA) lending here or are they running away?
3. 3. What market tier have the agencies classified _______ market as?
4. 4. How much equity will I require to enter _______ market?
5. 5. What are the typical expense ratios in _______ market?
6. 6. What will my cash on cash return be if i invest in _______ market?

The list goes on and on. It's a great starting point to get BiggerPocket member opinions but at the end of the day, you'll need to analyze deals and hope your lender can support the valuation that the data (comps, recently closed transactions, etc.) supports!

tldr; use data to drive decisions, valuations, and investment decisions! 

@Aaron Smith I recently authored an overview on recourse vs. non-recourse. I think it covers the basics! Happy to discuss the benefits and help evaluate if the Freddie SBL program can work for you, feel free to message me directly!

So many things @Kaylee Walterbach!! I've found that having my financing lined up ahead of any acquisition has helped tremendously. More often than not, people come across an OM and by the time their lender's analyst returns with a "soft quote" 24-48 hours later the property is sold and they're back to square one.

On top of that, knowing how a lender underwrites but most importantly being able support a property value with data-driven comps has helped me avoid waiting for appraiser and broker OPINIONS. It also helps maximize my NOI which ultimately gets me more $$ in my pocket

tldr; make sure you're using data to drive decisions and valuations!