All Forum Posts by: Matthew Dunn

Dear BP Community, I’m under contract on a triplex in central FL and am looking for any recommendations for a local community bank or credit union in my area. I’m located in Bradenton. I have relationships with a number of mortgage brokers and banks that I’ve used before but they all sell loans to the secondary market. I’m interested in a local bank who underwrites in house and who I can build my portfolio with. But is this the best strategy while I‘m still yet to cap out my Fannie Mae loan count? I have two Fannie Mae investor loans currently that were sold to secondary market, am I better off in terms of rates and costs continuing to just use my broker for another Fannie loan or switch to a portfolio loan via a local bank? Thank you!

Dear BP Community,

I’m scaling up into smaller commercial multifamily and currently have a fourplex in the Tampa Bay area. I am looking for a property management company that specializes in multifamily (4-30 units range). I am currently looking to acquire 12+ units in a large radius of SWFL through Central FL up to North FL (Jacksonville) areas and a company that has a presence in these areas would be ideal. TIA!

Matt

Yes, I just purchased it a few weeks ago. I've analyzed around a dozen properties so far. I really like it and it helps a lot to run it in conjunction with his training videos for the first few runs, as there'd quite a few steps to remember. 

Originally posted by @Hadar Orkibi:

@Matthew Dunn some local banks may offer you 75% of the loan amount and 75% of the rehab cost, you will need to show them the plan and scope of work. 

 Paying for renovations from cash flow is a No no, many investor learn the hard way...

See if you can go back to the seller and increase the price so you can get a repair allowance at closing. im not sure if agency debt would allow that but talk to your broker.

The broker I have approached so far, will do 70% of the loan and they typically want to see the rehab not more than 20% of the total loan request and that the loan as approved can be serviced with existing rental income (not dependent on higher rents post-renovation). I'll see if I can push for 75%.

Originally posted by @Andrew Beauchemin:

@Matthew Dunn Yes, you have the right idea.  Bridge-to-perm.  

Get a 12 month interest-only bridge loan to cover acquisition and capex, then roll it into a long term loan after stabilization (90% occupied for 90 days is a good benchmark).

You can do this with two separate lenders, or find one that will take on both loans.

Agency SBL loans have $1M minimum, try and find a local/regional bank or a private money lender for the debt.

 Thank you, this helps!

Originally posted by @Michael Dang:

Yes, your thought process is sound.  However, a conventional Fannie Mae or Freddie Mac agency loan will not do small loans, as in this case.  It should work with a Freddie Mac SBL loan, but your rehab\capex budget will not be allowed with this product.  A bridge loan could possibly work, but it maybe recourse and that's up to your comfort level.  I would check with your commercial mtg broker.

Just some thoughts to help answer your question.

Have you considered a local or regional bank for potential loan products that may fit your needs then refinance it into agency?

How about considering capital partners or hard money lenders?  

If you have some securities, maybe a securities-backed loan is an option.  Securities Backed Lending

Thank you, I'll approach my mortgage broker and I have a couple local banks in mind that do commercial for the initial purchase and rehab. 

Dear BP, 

I had a quick question on commercial financing for my first larger deal, so I am pre approved from Freddie / Fannie for a $1MM purchase, I have literally just enough capital right now to do that, but limited extra capital for rehab. But my goal is obviously to add value via reducing expenses/increasing income. After rehabbing a prior quadplex, I have a good feel for costs per unit, the properties I like need new kitchens, floors, bathrooms etc. This will probably run me around $75k-$100k for a 16 unit $1MM deal. However, I don't like the ideal of using cashflow to improve units for a couple reasons, I see it as a slower strategy, I have to wait for cash every month to improve items, and what if there's a large capX issue, now I'm potentially stalled mid rehab with a vacant unit. I would rather have capital at the start to begin rehab on any month to month units, exterior improvements and get it all turned around and to market rents within 12 months.

Am I on the right track with that thought process, and if so what is the best way to fund the rehab? Is it possible to use a bridge loan at the start to buy the property and rehab it, then refinance it into agency debt? 

Thanks so much!

Matt

Dear BP, just a brief update and follow up question. I have just about completed the agreement updates for my step father. I have decided he will earn up to 8% on what he contributes as capital from the cashflow. I am also giving him 25% ownership in that when we refinance or sell he will receive 25% of the profit. 

My follow up question is, how quickly should I state he will begin earning the 8%? We will be buying a value add apartment, so it may cashflow from the get go, or it may not and need rehab. Is it typical for a capital partner to earn on their money from the get go or only once we begin to reach a certain CoC?

Thanks!

Originally posted by @Caleb Heimsoth:

Matthew Dunn I would just agree with your step father what return is fair. Let’s say it’s 8 percent.

He gets all cash flow until that return is reached. Then id split it at something like 70 percent to you and 30 percent to him the rest of the way (annually).

Another way to do would be split cash flow 50/50 and just pay yourself a typical PM rate of let’s say 10 percent gross rent.

Likely the second option would be more beneficial to you.

 That's a good idea, I'd not considered that. 

Originally posted by @Brett Goldsmith:

@Matthew Dunn Who's getting the note or are you both needed to be on it to get qualified?

 I'll have the note, but he'll be on the title.