All Forum Posts by: Morris Cohen

I have a portfolio of 11 units worth almost $1.1MM. The portfolio consists of six single family properties and one five unit. I received a term sheet froma commercial lender at 5.2% on a 5 year balloon at 5.2% with yield maintenance or 5.5% for a 5/4/3/2/1 PPP. They really want me to take the yield maintenance option though. Has anyone had any experience with yield maintenance? Is it worth the extra 30 bps to have certainty in my prepayment penalty? All the loans I have on the SFRs are Fannie loans (there are others on my credit outside of this portfolio as well) and I need to clear my credit so I can continue to buy more SFRs hence the reasoning for taking a commercial loan. Fannie loans don't have PPPs and I love that flexibility. I have no plans at the moment to make any changes to this portfolio, but five years is a long time and although my plan at this moment is to take this loan to term that may change and I don't want to be charged an arm and a leg to get out of this loan should there be a need; especially if I expect rates to be decreasing over the next few years. Any thoughts or advice would be greatly appreciated. 

I would 100% continue showing it and it’s surprisingly very common. I have even seen people accept two offers at the same time and the first one to come back with an executed contract gets the deal (which I think is a little much though). There is no guarantee this buyer will actually sign the deal, so I think it’s completely reasonable for you to keep showing it and let the buyer know it (maybe it will motivate him to sign). 

That being said, I also think it’s a little crazy that he wants to wait for the financials. 2018 financials typically come out this time of year and he should be able to get a good idea of the building’s finances based on the 2017 financials. If the building’s finances for 2018 are drastically different, then you can put a clause in the contract allowing for him to get his down payment back. If it is a drastic difference then the lender might decline to lend in the building anyway, so he won’t have an issue getting his down payment back. This makes me think that the buyer may be getting cold feet, which is even more reason why you should continue showing the apartment. 

Regarding your broker, is he part of REBNY? If so, it would be against their code of conduct and that of his company for him not to provide you with all offers that are made. He can advise you not to take an offer, but he is required to present them to you. If he doesn't he is not acting in your best interests, which is his job. I would also be a little wary of using a broker that is not willing to continue showing the apartment at this stage. Deals fall apart during due diligence all the time and continually showing the apartment is pretty common place even if it's just to accept back up offers.

@Jay Hinrichs agreed- Refis are possible in a Self directed IRA, but very difficult. Expect high rates (mid 6's with prepayment penalties and points). The LTV must be low and the property must cash flow since you can't sign personally, but it is possible.

I assume you don't have a personal guarantee? If not, what is the LTV of the 1st mortgage not including your lien? It may make sense to ask the seller to give you the deed in lieu of foreclosing and to refinance into a longer term loan once the property is rented. I know the original plan was not to be a landlord, but I have found that time fixes a lot of issues in real estate and waiting 5 or so years for the market to appreciate may allow you to avoid a loss while paying down some of that 1st in the interim. There are only two banks in the country that I know of that will lend to a SDIRA, so it probably makes sense to run through the scenario before executing.

The good news is that the FHA doesn't lend on Co-ops. As such, the other offer with a 203k loan isn't really a viable offer. I know the Co-op needs work, but is it technically habitable as is? I know it may not be to your standards, but conventional lenders typically do not allow you to purchase something that isn't habitable, which may mean you may have trouble as well.

Sounds like a good strategy, but just make sure the co-op board allows for sublets. You may be able to get away with renting out the other room off the books, but I’d just make sure you have extra money in the bank should there be an issue. Good luck!

I have a client that is looking to refinance 68 SFRs in Oaklahoma. The issue is most lenders (Corevest, Lima One, Vizio, Finance of America, Cherrywood, etc) won't lend because the rental contracts all have rent to own clauses in them. The portfolio cash flows pretty well. Does anyone know of any lenders that would consider this? If so, please share. 

If you have an existing relationship with a small community bank they may consider doing something like this. They likely won’t do it on a 30 year fixed, but they tend to do things a little outside the box that the big banks won’t do. Other than that, an expensive bridge loan is likely your only other financing route. 

A coop and a condo are two different things. When you purchase a coop you are purchasing shares in a corporation that own a building along with a proprietary lease to occupy one unit. When you buy a condo you are buying the actual apartment. Your question depending on whether it’s a condo, a coop or an HDFC coop have different answers and they also depend on what your goals are. 

For an HDFC coop, they tend to have income restrictions (meaning you can’t purchase it until you make less than a certain amount) and as a result of only being able to resell it to someone also making less than a certain amount of money it usually means that the property doesn’t appreciate very much. There are also typically very strict rules regarding renting it out. As such, from those perspectives it may not make the greatest investment. That being said, if your goal is to decrease your housing payment and have some of that money go toward principal pay down so you can save up and invest elsewhere, it’s not a bad idea. Housing is so expensive in NYC and this can help curb that. However if you’re looking for appreciation and cash flow I’m not sure HDFC is the way to go. 

I have helped people finance in HDFC coops in the past. There are typically going to be income restrictions, meaning in order to get approved you need to make less than a certain amount of money. Each building has different maximum income figures, so you would need to reach out to the listing agent to make sure you meet those requirements. You would also need to work with a bank that is ok with lending in a building like that. Lenders like Wells Fargo have an issue with lending in HDFC coops because if they ever have to foreclose there is a much smaller pool of people that can potentially buy it from them. feel free to PM me if you want to discuss this further. 

The best thing to do would be to pay an extra $2k (or even a little more) to the wholesaler in exchange for giving you 30 days to close. Giving a wholesaler more than they expected is always going to pique their interest. That way you have enough time to get a conventional loan. That's the cheapest and cleanest route to take. PM me if you would like to discuss further. Be careful of a wholesaler who claim the ARV is higher than what they are charging with no repairs. Especially in Indy. Many times the comps are there, but the finishes are nowhere near the same. Be very detailed when running your comps. Good luck!