Investor · Pullman, WA · Member since 2013 · 87 posts · 16 votes
Has anyone ever had a HUD loan for the purchase of an apartment building? I'm not if they are direct lenders or if they just issue guarantees to a lending bank. I'm looking at a loan of about 1.1M for the purchase of a 1.5M apartment building. Thanks for providing any experiences you have had with HUD loans.
Commercial Mortgage Underwriter / Broker · New York City, NY · Member since 2016 · 193 posts · 75 votes
9y
On an acquisition you can close with a lender that will offer you a bridge loan to HUD, but it will be very difficult to get a lender to offer this product on the loan size you are describing. Also, HUD loans don't usually make fiscal sense under $10 million. Agency would be a much better route. Feel free to PM to discuss the deal in further detail.
Investor · Pullman, WA · Member since 2013 · 87 posts · 16 votes
9y
Thanks for the info. My seller won't wait 6-9 months, maybe I should get a regular 10 year loan and then investigate re-financing with HUD. What are the fees for? Inspections? Appraisals, Environmental assessments? Is HUD a direct lender or do they issue guarantees and work through commercial banks?
Commercial Mortgage Underwriter / Broker · New York City, NY · Member since 2016 · 193 posts · 75 votes
9y
On an acquisition you can close with a lender that will offer you a bridge loan to HUD, but it will be very difficult to get a lender to offer this product on the loan size you are describing. Also, HUD loans don't usually make fiscal sense under $10 million. Agency would be a much better route. Feel free to PM to discuss the deal in further detail.
Lender · New Smyrna Beach, FL · Member since 2017 · 122 posts · 54 votes
9y
John - Eric is right, this deal is too small for HUD, but could be a great fit for Fannie Mae or Freddie Mac SBL (Small Balance Loan) programs. Where is the property, how many units, and how many are occupied? Even for the SBL programs, you typically need the property 90% occupied with seasoning (at least three months at that level), but in some markets the threshold drops to 85%.
Investor · Pullman, WA · Member since 2013 · 87 posts · 16 votes
9y
Thanks. I can get bank financing here locally for a decent rate --10 year loan, 4.5 to 5% with a 25 year amor, so I think I will just go that route. The property is in Pullman, a small college town and it is 31 units and is over 90% occupied and has been for a number of years.
I haven't been able to get a Fannie Mae or Freddie loan for 1-4 unit properties for a number of years as I am over the 10 property maximum (which they only began to enforce after the recession in 2009).
I haven't before heard of the Fannie/Freddie Small Balance Loan program. Is that for multi-family > 4 units?
Commercial Mortgage Underwriter / Broker · New York City, NY · Member since 2016 · 193 posts · 75 votes
9y
Freddie SBL will offer much better terms than the local bank terms you just described. They designed for smaller loans in the $1MM to $6MM and as high as $7.5MM depending on the market. PM if you'd like to discuss your deal in more detail.
Lender · Chicago, IL · Member since 2013 · 82 posts · 27 votes
9y
John,
10 year money on a Multi-Family property is great however what a lot of people fail to mention is that your prepayment penalty is 99.99% one that is calculated off of yield maintenance... that gets mighty expensive.
PM me and we can have a chat about the property, your plan and a couple exit strategies.
Commercial Mortgage Underwriter / Broker · New York City, NY · Member since 2016 · 193 posts · 75 votes
9y
Freddie SBL can be priced with either a YM prepayment penalty, a standard 5,4,3,2,1 step down or a pro rated prepay that starts at 3%. So you don't have to be locked into yield maintenance.
Rental Property Investor · Walla Walla, WA · Member since 2016 · 480 posts · 346 votes
9y
@John Chapman, were you able to get the apartment under contract yet? I am interested in possibility of getting into the larger MF eventually! Thanks for allowing me to share. Here is to wishing you a successful 2017 in your REI ventures!
Investor · Pullman, WA · Member since 2013 · 87 posts · 16 votes
9y
No, I haven't, although I believe the property is still available. I might make another (or the same) offer in a little while if it is still available. The original listing price was completely unrealistic and had no basis in reality so that's probably why there have not been many offers.