All Forum Posts by: Madison Carlson

Hey Thomas,

How many units is this property of yours? I work with a large network of lenders in the Oregon, and Arizona Market. I specifically do commercial/apartment loans. 

The strategic use of debt can significantly accelerate capital/wealth growth, provide income-tax protection, and often improve after-tax cash flow. No matter whether the property is a new acquisition or currently owned, financing (debt) should not be an after-thought. I recommend seeking a mortgage broker. By working only with one direct lender, you are unlikely to get an approval with the best possible rate and terms. You simply cannot afford to be passive about the lending component of investing in income-producing commercial/investment real estate. Most people just aren’t comfortable negotiating with their real estate lenders. 

However, the underlying financing can dramatically impact your real estate investments' performance. There are many negotiable terms to take advantage of, beyond just the interest rate. Key among these are loan amount (LTV); Pricing Spread/Margin; Reset Index and Margin; Prepayment Program/Penalty; Recourse versus Non-Recourse, Assumable (yes/no); Loan and Processing Fees; and more.

As for the application process of refinancing I would be happy to go over this with you and what to expect regarding timeline/documents/fees/current rates, etc.  Depending on the type of property and the terms of your existing loan things can vary. Right now, apartment/commercial rates are historically low (low-mid 3% range). Ive been helping a lot of my clients with refinancing and repositioning their portfolio before rates go up. Rates are anticipated to slowly increase so now is a great time to explore refinancing, and lock in a new rate. Feel free to pm me if you have any additional questions! 

Hi Danny,

Great questions you have! I have provided some guidance below. 

1) We always suggest getting pre-qualified and sorting out your financing first. This will allow you to get a realistic understanding of what you can/can’t afford and a baseline for what you need to do to improve you position and any additional capital to save. 

2) Lenders will request the below preliminary information.

1. Name of entity (organizational chart if applicable)
2. Personal Financial Statement (PFS)
3. Schedule of Real Estate Owned for each borrower/guarantor (SREO)
4. Resume/Bio for each borrower/guarantor, if applicable
5. Bank statements for verification of deposits
6. Last 2-3 years of tax returns

I recommend using a mortgage broker in your area that is able to connect you with top commercial lenders to get you multiple competitive offers. When brokering an apartment/commercial deal with our clients we also act as the gateway liaison on the finance side and connect them with our network of lenders. We do the negotiating for our clients. We encourage and motivate lenders to compete, getting our clients the best rate and terms, by collecting multiple offers from lenders.

As for the process after preliminary information is provided:

From here, you receive one or more loan quote offers from lenders. After selecting from those preliminary offers, the process of making formal loan application will begin. The chosen lender will pre-underwrite your loan to evaluate the risks related to your credit, capacity, and the condition of your collateral. Once the preliminary underwriting is complete, the lender will provide you with a Term Sheet – also known as a Letter-of-Intent (LOI), outlining the full expectations for the loan. From there, the lender will order an appraisal, any other required third-party reports and move your file through the formal underwriting process. The Credit Department will then generate a FINAL Commitment Letter and close the transaction through escrow.

4)
Pooled Fund Investing is the combining of capital from multiple investors which, when added together, create greater purchasing power (and thus more diverse and higher returning investment opportunities). The group is comprised of a few (typically 2 to 5) investors, with similar investment goals. As a group you will invest directly in a piece of real estate. Each member of the group will hold title to the real estate as Tenants-In-Common.

The Tenant-In-Common entities are each named on the deed, as well as the Tenant-In-Common entities percentage of individual ownership. A signed agreement between Tenant-In-Common owners details respective rights and responsibilities. Additionally, all services the owners, as a group, contract for, should have separate contracts, with payments based on specific services rendered. For example real estate commissions earned from buying and selling a specific piece of real estate, professional property management fees, legal and accounting fees and fees associated with refinancing of existing debt. The group may contract for specific products or services from an individual member of the group if that member is affiliated with a business that can offer value to the group. The contract needs to stand on its own merits and be open for review and separate from the ownership agreement.

5) Feel free to check out my page and Realty Yield's website for more information and resources. We currently are based out of Oregon, but are expanding to Phoenix, Arizona at the beginning of 2022.

The Cash on Cash (CoC) return is the rate of return used in real estate to calculate the cash income earned on the invested equity in a property. Cash on cash return = net operating income/total cash investment. This measures the annualized return. Cash on Cash return is one of many important metrics used in the Investment Analysis process.

Let's dive into the different type of investor portfolios and how your financing strategy can affect the CoC. Those with low to no debt generally have a lower CoC. The challenge for investors with significant capital/equity in smaller income-properties is that though positive cash flow is being generated, the CASH-ON-CASH return (%) on invested capital is typically low single digits. And, depending on the effective tax rate of the investor, the after-tax return on cash flow is almost always to some degree even lower.

The simple fact is that larger multi-family properties (apartment buildings), mixed-use properties and retail buildings sell/trade at capitalization rates that offer investors’ greater yield assuming sufficient capital is available for investment. With smaller income-properties, investors usually must make a strategic choice whether cash-flow OR growth of capital/equity is the primary goal, it is just not arithmetically probable to maximize both at the same time.

You may ask yourself how you can optimize these metrics depending on the investor’s portfolio. This leads into the purpose of Realty Yield’s Investment Property Analysis (IPA). The purpose of our IPA is first to analyze and summarize the performance of your current real estate holding-s from a return on invested capital/equity standpoint. Based upon the analysis and your strategy we will evaluate options to see where we can achieve higher returns, or growth of capital/equity.

Hi @Sheree H.

I would be happy to connect you with my network of appraisers! Feel free to pm me. 

Hi Travis,

Based on my experience with clients holdings of this size (2-4 units) I would say I commonly see a range between $750-$1,500 for an appraisal. This also depends on a few variables including timeline and if there is a rush in timeline. Would be happy to connect and see if I have anyone in my network that could be a useful source in your search! I personally only work with commercial/apartment loans (5+ units) but would be happy to get you connected to an appropriate resource. 

Hi @Antony Munoz,

I would love to connect and find a time to have a conversation via phone or zoom! I am based out of Portland, Oregon and Bend, Oregon. I work all over the Oregon Market as an Investment Real Estate & Mortgage Broker. Would love to connect you with my network and talk specifics regarding current Oregon Real Estate Market trends. 

Hi Travis,

I would love to connect whether it may be virtually or in person! I am based out of Portland and Bend, Oregon. But work all across the state or Oregon. I would love to chat and see how we can utilize each others networks. I work as an Investment Real Estate and Mortgage Broker. Therefore I have a large network of connections in a variety of services related in the Investment Real Estate transaction process. (Lenders, Appraisers, Brokers, 1031 exchanges, landlord services, Advisors, etc). 

Hi Isacc,

First and foremost I would like to say welcome to your family member that is moving to Oregon! I am a born and raised Oregonian and hope they enjoy their new home state as much as I do. 

I would love to connect as I not only am a Investment real estate agent based out of Portland and Bend, Oregon. But I also have a large network of individuals that I would be happy to connect you with, if I am not the perfect fit given your family members specific situation! I work on the Advising/Analysis side, Brokerage, as well as Financing and Mortgages. Feel free to shoot me a message to connect. 

Finding a broker with pocket listings is key! You can't find those on any MLS or website. We often find ourselves in the position with pocket listings as we represent both the buy and sell side for multi-family/investment properties. When lucky and the timing pans out we have a client looking to buy a property that meets the criteria of the property we are in the process of listing.

Hey Jessie,

Would love to connect. I work closely with multifamily lenders in Oregon, and would love to go over what out of state financing would look like.