All Forum Posts by: Andrew Beauchemin

@Brian Garrett If you shine in all other categories except net worth, and the asset is solid, they may make an exception, but it could affect the strength of your terms.

@Brian Garrett Focus is on the asset, but they'll still check on the borrower's PFS.

Usually looking for net worth greater than the size of the loan, and liquidity to cover 9 months debt service. (combined between the guarantors)

Not sure if I can post links in the forums: http://www.crefcoa.com/freddie-mac-small-apartment-loan-program.html

@Christy Wright I always recommend shopping around multiple lenders for every deal.  Even if you engage a broker, you should still shop around an additional couple lenders yourself (if you have the time/energy).

Freddie SBL loans cap at 50 units, so you won't be able to take advantage of that program (unless they can somehow make an exception), but there are still great Agency (Fannie/Freddie) programs that would work. The rub with Agency is that it can be difficult to qualify for. If your deal is in a market they aren't crazy about at the moment, that may kill your chances at 80%LTV / 30am right off the bat. Check out the Fannie/Freddie websites for general terms, or speak with a broker/lender for more specific terms.

I've underwritten 30 year am with non-Agency lending sources in the last 30 days (Banks, credit unions, etc.); if the asset is in good shape and performing, and the borrower/guarantor is strong, shouldn't be any problem finding 30am.  Try a couple larger regional banks that lends in your area.

@Elaine Lau  I would provide both "actuals" as well as your "Pro forma" numbers.  Normally I see price based on the pro forma numbers, or it is listed unpriced.  I think it is reasonable to include fixed, predictable expenses, like taxes, in your proforma, but numbers like utilities and R&M are best estimated using historicals.

At the end of the day, the buyer will do their own underwriting and come up with a number that works for them.  The best thing you can do is provide more information than less.

@Ross Sib, What is your exit strategy?  Are you planning to sell or hold after stabilization?

 I think you will get the best financing by doing a long term hold, using bridge-to-perm financing from a local bank lender.  

To answer your question, yes, you should be able to cover the majority of soft/hard costs (not including closing costs) with the construction loan.  Keep in mind this is going to be a commercial loan, not residential

Using your numbers in your post,and very conservative loan numbers, here's how I would break this down:

Total Project Cost  = $2,180,000 (280k + 100k + 1.8M)

Bridge Loan @70% LTV = $1,526,000 (Should be able to get interest only payment during construction)

Equity Needed @ 30% = $654,000

Your Current Equity = $200k + Cost of Land (original purchase price, current market value does not matter) 

Don't forget to have cash ready for closing costs, rezoning, legal, etc.

Stabilized Value = $2,500,000

Refi @ 75% = $1,875,000

Cash out @ 25% = $625,000 (minus fees, etc.)

@Ari Newman another strategy I use is to look through large brokerage's OM packages on similar deals in your area.  They will usually have a page or two for rent comps.  i.e. CBRE, Marcus & Millichap, etc.

@Shimmy Yose You will be looking at different loan structures depending on what size multifamily you decide to buy.  Anything that is 1-4 units will be considered residential, and 5+ commercial.  I would recommend you meet in person with a personal financial adviser or mortgage broker that can explain how each is structured and what works best for you.

If you're interested in large multifamily, I think a great strategy would be to invest as a Limited Partner with an experienced group that will mentor you through the process.  

@John Dreher Can you tell us more about what kind of deal you're in the market for? For example, a stabilized NNN Rite Aid acquisition will lend much differently than a ground-up multifamily development.

Yuriy Skripnichenko , I agree with Frank, it sounds like you should speak with a commercial retail broker. You’ll need to have a few different professionals (attorneys, zoning, etc.) answer your questions specific to your area, and a good broker should have all of those connections. If you’re in Philly, I’d recommend MSC retail, Metro Commercial, or I have retail professionals in my office under the name Rittenhouse Retail. PM me if you’d like an introduction to anyone.

@Kel Hoffner In my experience, commercial lenders will consider the land/building you currently own, valued at the price you purchased it for, not the current market value.

i.e. if you bought the building in 1990 for 100k, and today it is worth 1M, the "skin-value" of the building is only 100k. 

Using my made-up 100k number, add your 150k + 1.5M, and your total equity is 1.75M.

You can find financing based on both LTC (Loan-to-Cost) and LTV (Loan-to-Value). Depending on your exit strategy, a "bridge-to-perm" loan may be a good option here.