All Forum Posts by: Andrew Beauchemin

Fannie Mae just increased their SBL loan limit to $6M

http://www.fanniemae.com/portal/media/corporate-ne...

@Gino Barbaro I'm seeing a mix of pref structures (upside potential, waterfall, etc.), but the rates are usually around 10-12%. 

Lots of JV money out there, not as much passive pref. 90/10

Institutional seeking IRR 18%-22%, Private 25%+ (Ballpark)

@Allen L.  Regardless of your experience managing properties, the lenders will still underwrite your expenses to include a market-rate property management fee; you should do the same.  

As long as you're bankable in other categories, I don't think you'll have a problem getting a loan even if you decide to self-manage. (i.e. you're local to the property, not taking too much leverage, good credit, liquidity, DSCR, etc.) If you're willing/able to offer your other SFH's as collateral on the loan, even better.

Best advice I can give here is to shop around.  Don't just walk into one bank and take their first offer, assume everything is negotiable.  I'm obviously bias, but I agree with @Scott Wolf that a commercial mortgage broker would be a good idea here, considering it's your first commercial loan.

@Keith Linne I agree this sounds like an Agency deal.  Lots of agency servicers will offer an interest-only bridge program for the 12-18 month renovation / stabilization, and roll it right into a perm loan without any additional fees.

Shoot for 70-75% LTV if it's your first Agency deal. Freddie/Fannie don't like tertiary markets (assuming you're investing in Minnesota), and if it's your first deal they will put you through the ringer. If you have strong personal financials you may be able to offset these for a higher LTV.

Are you able to increase the value of the property in those 6 months?  I would stay away from hard money if there is not a short-term significant value-add play.  

I would recommend finding a JV equity partner that has cash, experience, and is bankable.

To answer your question, yes, you will need to be able to support 20-30% of the assessed value at the refinance.  If you can force appreciation before the refinance (increasing rents, cap ex, etc.), then the added value goes toward your equity.

Is there anyone you can think of that would write you a personal loan, rather than a traditional debt lender?  I'm hoping you don't get killed by transaction cost minimums.

Any way you could turn this into an SBL or is it strictly your primary residence?

@Danren Jones IO in most cases is used to lower the mortgage payment during times of lower cash flow.  i.e. renovations, new construction, lease-up.  If your property is stabilized and cash flowing at full capacity, you should be paying down the principal.  Keep in mind that principal payments are essentially you paying yourself in the form of equity. 

@Corey Reyment  How is the seller loan structured?  Are they taking an equity piece, or treating it as debt?  

Assuming the latter, your primary debt lender will see this as more of a "B-piece" debt/mezzanine loan, and will still want you to come up with 25-30% of the equity.  "You", meaning the ownership entity, not necessarily you personally.  

With a 20% seller finance, here's how the capital stack could look, in my opinion:

Equity = 25%.  (Of that 25%,  minimum for General Partners would be 10%, Limited Partners 90%).

Debt = 75%.  (Seller - 20%, Lender - 55%).  Lender takes first position over seller.  Seller will take 2nd position over equity partners (most likely at a higher interest rate than 1st position).  Pref equity will take 3rd position, GP last position.

Hope that makes sense!  

@Yuriy Skripnichenko Check out CSR Land & Snow.  I'm not able to post contact info in the forums, send me a PM 

@Kenneth C. Jacob Cohen, CPA is who I use.  He is an excellent CPA and also has real estate investment experience.  

Feel free to message me for his information