All Forum Posts by: Ron K.

Thanks @Evan Polaski and @Taylor L.     I'll monitor the markets, and as the property appreciates, with perhaps some rise in rates in the coming years, would make the assumable loan attractive.  For now the property will cash flow nicely, thanks.

Thanks @Taylor L. People need to understand how severe Yield Maintenance can be.  I hadn't considered that scenario...

Hi all,

I refinanced a multifamily in September of 2019 with a Fannie Mae Small Balance Loan.  All along, it looked like the rate would be about 3.75%, but I was told I couldn't lock. Then right at closing, I was told, rates went down too far, so they changed a grid or something, and my rate was 4.8%.  I bought it down to 4.6%, but at that point, it was too late (or so I thought) to back out, since I had so many non-refundable costs, and I need the equity out for another purchase.

Looking at it now, because of the Yield Maintenance, I can't sell or refinance until my 12 year term is over.  My current YM penalty is about $400,000 !   I learned many lessons from this, but what's done is done.  It's a fine property, and cash flow is improving year after year, but I would love to sell in a year or two and getting better use of the equity (since I won't be able to refinance).

I'm trying to understand at what conditions someone would assume my loan..

Would I need the treasury to go up another point or so, for Multifamily rates, in a 2nd tier marker to be above 4.6%?

With appreciation, at the price I would want to sell, the loan would only be 55-60 LTV, so the buyer would need another loan anyway.

Just trying to see if people actually do assume Fannie Mae loans in these types of situations so I could see if there is some point, I'd be able to my equity out of the property.

Thanks,

Ron

Thanks @Josh Caldwell and @Account Closed. Sounds reasonable, I'll just keep trying to increase the cash flow, even if I pay for it in the short term.

Hi BP,

I have property with built-up equity, and I was planning to sell and trade up (refinance doesn't work for me).

The problem is, that I believe that the costs associated with trading a property are too high.

Please see what you think of this calculation:

• Property value (i.e. sell at): $200,000.
• Loan: $100,000
• Equity after sale (assume 8% cost of sale):  $84,000
• Cost to buy a new property: $6,000
• So, my equity in the new property is: $78,000
• Assuming I need to put 30% down (investor, >4 mortgages, buying 2-4 unit), this allows me to buy: $260,000

To keep things simple, let's say I cash flow $200 more a month in the new property, and let's say I pay down the same amount of principle, and the expected appreciation in the same in both properties.

Additional gain: 

• Cash flow: $200 * 12 = $2,400
• Appreciation: At 3% appreciation, the new property makes $1,800 more

So I make $4,200 more per year, but I lost $22,000 in equity !! (take 5 years to make that up).  Does this make sense?

It seems that once you own a property, you've paid the buying cost, and committed to paying the selling cost, so the longer you hold the property the more real gain. i.e. every extra trade is quite expensive.  Obviously, at 6% appreciation, the trade looks better, but you can count on that, and I can't predict if I'll have better appreciation at the new property.

What do you think?

Thanks,

Ron

Thanks Robert.

The reasons I'm looking at Florida is that it's a great growth area with consistent demand due to all the various drivers (tourism, industry, etc.). Also, over the years I've purchased houses and built up some parts of a team. I may look at other areas (Texas).  I may just with smaller multifamily.

Thanks Joel,

Agree, there are a lot of difficulties.  I am a US citizen though, so at least for the single family homes, I was able to get financing, although the process was more complicated.

I would be a passive owner, with hopefully, with an excellent local property manager. 

The entity issue is more complicated, but I feel I have a handle on that. 

I see that agents are not running to get my business, but I have been sent a few names, for example, by an agent that said she can't handle it.

I guess I would really have to trust someone, assuming I can get the financing. I probably wouldn't be given the best property, but maybe something good, to get started in multifamily.

Thanks.  I am looking at 5+, and I've had some difficulty getting interest. Then I was told by a multifamily agent, they don't really have buyer's agents in multifamily.

Hi,

I've been buying SFHs for a number of years, using local buyer's agents, sight unseen. Now, I'm interested in MF (Central and South Florida), and I'm getting the impression from agents, that in MF things worked differently. i.e. you need to get "deals" sent to you from listing agents, and work with them.

Is that how it generally works?

Any suggestions for an out of state investor?

Even if I did fly in, and spend some time in the area, I would never know it like a local, and I would need to rely on someone local to know which are the best sub-pockets to buy in.

I'm interested in the $800K range.

thanks,

Ron

Thanks.