All Forum Posts by: Darryl Dahlen

These numbers are less than useless. As stated, you need to look at the YTD and 2014 figures, at a minimum, to really get a feel for how this property is operating.

The provided numbers show a 41% expense ratio, which is low. A property like this should be in the 50-55% range with efficient management, but it's not uncommon to see a higher ratio.

For a property that needs work, is $36k/door the norm? Seems high for a property that's only generating $500/month in rent.

 I missed your reply to my post. I'm in finance so I see a lot of P&L's for multifamily properties. I can't even remember the last time I saw someone running expenses as low as you. Self-managing certainly helps you, but lenders don't like to see it and they're going to knock you for whatever the market management fee runs.

I'm not understanding what you're looking for. You state you own the property, but your original post states a purchase price. Are you looking to sell or simply looking for feedback on your numbers?

You need to look at what the market expenses, rents, and vacancy rates are. That's what the lender is going to use for UW purposes and I've never seen a market where expenses are what this property is running.

Do they self-manage?

The monthly rent is $17,300 or $207,600/year and the NOI is $145,698? That equates to to $61,902 in expenses or just under 30% which is very, very low. Expense should run around 50-55% so something isn't adding up.

Questions to ask:

1. What is a realistic LTV for me and my partner and the market we're looking at? You want to know what LTV can qualify for, not a high-net worth borrower with loads of experience who has a long relationship with them. You're new so it's important to know what terms you realistically stand to get.
2. What are your current closing times?
3. What goes into the approval process? Some banks, not many, will issue a term sheet with little to no pre-underwriting. You want the lender to do a lot of analysis prior to you engaging them so everyone from the LO, UW, and credit officer are comfortable with the loan request. This helps to ensure the terms don't change and any obvious hiccups are known upfront and can be addressed.
4. Do you allow seller 2nds?
5. What if there is any differed maintenance issues. Do you allow a LTC approach?
6. What is your PPP?

Most lenders aren't interested in looking at anything until there's a property involved. It ties up man hours, but they'll likely be happy to talk to you and give you advice on what kind of property, market, loan size, etc. they like and don't like.

Freddie and Fannie also have loan amount minimums, but even they prefer to stay in the 5, 7, 10, or 20 year hybrid, term with a 30 year amortization. Only HUD offers a fully amortizing 35 year term.

As stated, it's very rare to get a loan that is longer than 15 years, from any lender, and you've done well to get that much.

Generally, the longer the term of the loan the higher the rate since the lender is going to build in a buffer to compensate for market fluctuations. 15 years is a long time in the commercial space.

Grated, a higher rate isn't going to have a dramatic impact on a small loan so the upside to you knowing that you have a long-term fixed rate may be worth it. The second component that affects the payment is the amortization. Are you getting a 25 or 30 year amortization or is this a 15/15? 

Lastly, you stated you have 20% to put down. You want to make sure you can actually obtain 80% LTV as that's high with most lenders actually lending in the 70-75% range. An 80% LTV, long-term, loan isn't something most banks would be fine with. Too much risk.

First Key Lending offers one-off loans on SFR, and multifamily, investment properties and they don't care how many properties you own or mortgages you have. They underwrite the DTI of the property much more than your income which can be a benefit to a lot of people and they offer fully amortized 30 year loans with no PPP up to 75% LTV. Could be worth checking into.

First Key Lending offers one-off loans on SFR investment properties and they don't care how many properties you own or mortgages you have. They underwrite the DTI of the property much more than your income which can be a benefit to a lot of people and they offer fully amortized 30 year loans with no PPP up to 75% LTV. Could be worth checking into.

I don't know as I'd go for a 15 year amortization. Joel is spot on. If for some reason the tenant leaves, you're left holding the bad on a very large payment. I'd look at the out clauses in the lease to see what the penalties are for breaking it as they may be stiff or not so much.

I'd recommend a longer amortization to lower the payment that gives you the option of paying down principal when you want, but where you can make only the regular payment if needed.

You can set up an LLC at any point just to have it ready to go. It's almost a guarantee that the lender is going to require that it be a SPE so having it established isn't going to hurt you.

At your level, you, and any other guarantors, will be the ones underwritten on the guarantor side of the loan since you will almost certainly be looking at a recourse loan. As such, it will be your credit, income, and assets will be what are scrutinized, not your LLC's, and the rule of of thumb is that anyone with an ownership stake of >20% will need to sign on the loan.