All Forum Posts by: Tim Milazzo

Hi Kyle,

You won't be able to get a CMBS loan for new construction. CMBS loans are an option for stabilized assets that have predictable enough cash flow to enter a conduit (pool) that is securitized for end investors. When you get to the point of refinancing this hotel after demonstrating those stable cash flows, then CMBS could become an option.

 What you'll need for a construction loan is either a bank that will believe in the story (would be your best rate), or a private construction lender who would be higher rate but potentially more flexible and easier to obtain.

 Feel free to reach out over PM!

 - Tim

 It is possible to get a commercial loan in your scenario, but you'd be seeking a local bank that believes in you at those numbers. Your net worth and credit history won't get you to a Fannie Mae or Freddie Mac small balance loan yet. Local banks can still have good financing for local apartment complexes, but not quite the rate of the Fannie/Freddie loans. If it's a steeper value-add scenario, you may also not be able to get bank financing, and would need to look at private loan options which are potentially 7-10%.

 Another commenter has already pointed out that your deal scenario would be putting most of your eggs in one basket, which is a risk you need to consider. If there is a downswing and your property's cashflow goes sideways, you could be in a really tough spot, and your equity could dissipate. On the other end, a great project with strong execution could be a big jump up. The percentage of your equity that you're committing is high - make sure you have the knowledge and the help you need.

 Best of luck!

 - Tim

Sorry to come to the party late as the time is already limited, but scenarios like this that need a quick close with no nonsense is actually why there are private equity bridge lenders. They don't have the same hoops and approvals to jump through as bank lenders, so they can save a deal that might die due to timing. It's a quick turnaround, but bridge lenders would be your best shot. You'll be looking at a higher interest rate for probably a 6 month to 1 year term, which will give you plenty of time to line up permanent financing.

PM me and I'd be happy to give you some more quick info and a direction how to get in contact with bridge lenders quickly.

I was about the bring up the small-balance programs for Fannie Mae and Freddie Mac; looks like @Cody L. brought up one of them. Both Fannie and Freddie have small-balance multifamily programs for loans between $1M and $6M (up to $7.5M or down to $750k in certain circumstances), and they are generally in the low 4s, and can even be in the high 3s! There are other requirements for Fannie and Freddie as well and they are less flexible than a local bank, but a better deal if you qualify. I'm happy to share some more info over PM if you'd like to connect more on it @Kevin H.

Commercial bridge loans are known for their flexibility. These short loans are typically:

• 6 month to 3 year term
• Able to close quickly
• A good solution for deals that don't meet conventional bank or insurance company financing guidelines, or have a major value-add component

So if bridge loans themselves are so flexible, why is the market for bridge loans such a mess? You'll find hundreds of bridge lenders out there on the internet, and they all have their own specialties and loan parameters. Finding the right bridge lender means knowing what geographies they lend in, what asset types they prefer, the size of the checks they can write, how high they can go on LTV, etc. Mapping all of that out for a deal that already has a tight closing deadline? Then making phone calls to several bridge lenders to explain your deal, only to follow a separate process with each potential lender, and (hopefully) receive term sheets, which will be in different formats? Welcome to a commercial real estate nightmare.

If you need a bridge loan for you commercial property investment, don't you wish you could instantly submit a loan request to the top private lenders that are already in the market for your loan scenario?

One word: StackSource

We built StackSource to provide easy, online access to major commercial real estate lenders, including private, bridge lenders. Through a 10-minute interactive process, you'll enter information about your property and loan request, and instantly be matched to the right lenders for your scenario - lenders that are pre-vetted and targeted based on your asset class, geography, loan size, and loan scenario.

Did I mention it's free?

This is very tactical, but the Mortgage Payment doesn't factor into "Net Operating Income". You'll want to calculate NOI before any financing costs, so it's only "operating" without taking financing into account. Then you can calculate a separate total for the Cash Flow, which does include financing.

The reason to keep them separate is because when you are looking to buy or sell a property, different buyers will have different financing and you want a picture of how the property performs on its own first.

Hi @Gentry B. - awesome that you're looking to move up into larger deals! When you get to $5-$10M deals, you're now entering an arena where there's a lot of competition, and a lot of options as far as financing. Assuming you're looking to finance a stabilized, cash-flowing property, then there are a few government-backed programs that will definitely be in the mix including Fannie Mae and Freddie Mac, which both offer low fixed-rate terms, but there's also HUD (FHA) financing for multifamily assets if you're looking for a super long-term option, which loan terms as long as 35 years. Banks are players in this space, but you may be getting beyond the scope of your local community banks, so you'd want to start to compare some national bank lender options - some lend balance-sheet, and others securitize (CMBS).

I write about and help people through this sort of thing so check out a couple of my BP blog entries here, but please reach out directly if you have more questions or would like advice on how to start up the above. Thanks!

Multifamily HUD/FHA Financing: Beginner’s Guide to HUD/FHA Multi-family loans

Fannie Mae/Freddie Mac: Starter Guide to GSE Multifamily Financing

Hi @Alex Hamilton - through preliminary underwriting, you typically don't see hard pulls on your credit score. The StackSource platform doesn't make any pulls on your credit history. Instead, most of the input to get you toward initial quotes relates to the property, asset financials, and sponsorship experience. You can expect credit pulls to occur once you've selected a quote to move forward with the best lender.

Hope that helps!

We're looking for you! You're a current commercial mortgage broker or loan originator who's making deals happen - but hungry for more. You know that commercial real estate lending is ripe for change, and excited for the onset of technology in the space. You want to come help us make it happen!

Responsibilities

• Partner with the CEO in adjusting go-to-market strategy and driving business.
• Collaborate with product team on goals and product requirements for brokers, property owners, and lenders.
• Define appropriately aggressive goals, and then go get customers and partners on board!
• Lay the foundation for the organization’s future sales teams. Hire and lead them when we reach the appropriate business stage.

Check out StackSource.com, and if you are fired up, reach out directly to [email protected] or through LinkedIn.

Looking for financing for a Multifamily property that has 5+ units? There are a few different options you should be considering. Of course there are banks - community banks, regional, and national. There's also CMBS, Fannie Mae, Freddie Mac, private equity, and crowdfunding. How do you know what financing is available for your property? More than that - how do you know which is best?

Well, you can start calling around to lenders you find online or are referred to by various people. That tends to be a lot of work, and you may not be hitting the right people. It's also a lot of work to track down the right contacts and explain the story of your deal over and over.

Before you go down the path calling everyone you can find, familiarize yourself with different types of financing available.

Beginner's Guide to HUD/FHA Multifamily financing

As it relates to the multifamily loan program, "HUD" and "FHA" can be used interchangeably, as FHA is a part of HUD.

HUD loans provide extremely favorable terms on many multifamily assets. Refinancing a stabilized asset would fall under the 223(f) program, which provides a 35-year term and amortization, non-recourse loan at up to 80% LTV, and a rate as low as 3.75%. Construction and rehab deals under another program, 221(d)(4), provide even more leverage at 85% LTC and a 40-year term.

Read more 

Quick Overview of GSE Multifamily loans (Fannie Mae & Freddie Mac)

Fannie Mae and Freddie Mac, two entities originally set up by the US Congress, each support the origination of loans for multifamily real estate investment, particularly for stabilized assets that are being acquired or refinanced. These loans can be very cost-effective, and are often the best choice for debt financing on an existing multifamily asset.

However, the agencies themselves do not select projects directly to originate financing. Instead, each have established lending partners across the country.

Read more 

Find the right lender for your project

Now that you know a couple of options beyond just banks, it's still a lot of work to track down all of the right lenders and tell your story over and over. The easiest way to compare Multifamily (5+ unit) financing options is through , an online platform for commercial real estate loans. One digital loan request is automatically matched to top lenders across the country, including banks, Fannie & Freddie, HUD/FHA, CMBS, and private lenders. You can find the right lenders and have them compete for any multifamily loan, for free!