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All Forum Posts by: Emmanuel N Okafor

Emmanuel N Okafor has started 6 posts and replied 32 times.

@Charles Seaman

I looked up cap rate for the zip code and it says 5.5% for value add multifamily. The broker responded to me a few hours ago and acknowledged the cap rate for the area to be 5.25%. I calculated the value of the property by diving the NOI by the cap rate. Based on that calculation, the apartment is not worth more than $3,300,000 but the broker says the offer needs to be at least $4.5 million. He doesn't want to give me a tour until I submit an offer that is close to their asking price of $5.2 million.

@Comelia Hinkley,

Thanks for your response. I also thought the rent was too low but I haven't seen the complex yet so it may be a reflection of the present condition. I forgot to mention the security deposit aspect. I thought it was unusual to only ask for $100 for the one bedrm that rents for $990 and $200 for the 2 bedrm and 1.5 bathrm that rents for $1230. In my single family properties, security deposit is one month's rent. 

The apartment is in the 76118 area code. If you can let me know what 1 and 2 bedrms rent in the area, I would greatly appreciate it. 

Hello,

I am trying to buy my first apartment complex. I currently own 11 single family rental properties. I did an interest-only cash out refinance last month and pulled out $914,000 that I want to use to buy an apartment. My single family portfolio cash flowed $80k a year before my refinance and it now cash flows about $40k. My goal is to get a combined cash flow of at least $200k and in 5 years, I want to payoff my interest only loan and own my single family properties out right. 

I would appreciate any feedback on this deal. If you see any red flags or opportunities I missed. I also want to know if my offer is too high or low. 

My thinking

I view this as a value add investment opportunity. Based on T12 data and other documents I viewed I recalculated the apartment value. I used NOI of 175,646 and the DFW area value add cap rate of 5.5% to get a value of $3,193,663. Since they have a low reserve for security deposit, high late payment rates and no metered utility, electricity or gas, I offered $3,000,000. I reasoned the $193,663 can be used as reserve for metering the property and other needed non-recurring replacements. Is my offer too low? I would like to get the units metered but don't know how much that will cost. Ideally an immediate win for me would be to cut expenses down from the present 65.5% to 50% with minimal expense which will add a million to the valuation and allow me to do a refinance in a few years to pull out equity to buy another apartment. 

Details about deal

  • 1970 46 unit apartment in the DFW area.
  • 26 units are 1 bedrm, 1bathroom | rent $990 |security deposit $100
  • 20 units are 2bedrm, 1.5bathrm | rent $1230 |security deposit $200
  • Asking price is $5,200,000 | NOI=$217k | Cap Rate=4.17

Revenues

  • Total Revenue=$567,776 | Net rental revenue=$449,923
  • rental losses=$117853
  • Other revenues (application fee, pet fees, deposit forfeitures) =$59,766
  • Total Revenue=$509,689

Operating Expenses

  • Total personnel expenses=$88,603
  • Total property administrative expenses=$28,277
  • Total Leasing expenses=$4907
  • Total utility expenses=$36,991
  • Total service expenses=$10,953
  • Total cleaning and decorating=$16,305
  • Total repairs and maintenance=$14,468
  • Total property taxes=$78,731
  • Total Hazard insurance=$27,107
  • Total operating expense=$334,042 (65.5%)
  • Net Operating Income=$175,646
  • Total non-recurring replacements=$25,086
  • Available for debt service=$25086

Update

I often read posts here with many suggestions but never see a follow up on how things went. I am writing this post to provide an update. I am happy to update you all that I was able to pull out $914K from my portfolio, I ended up doing an Interest only cash out refinance. Not what I initially wanted but it got the job done and I am happy about that. Be shout out to Ben Nelson for introducing me to interest only financing and Nick Belsky for educating me on my options. Although this didn't work, I am sure I will come across a future financing that you can push through for me. 

Even with almost a million in the bank, I am running into the same financing issues again as for  I shop for commercial lenders to finance my future apartment. I am going to browse through the forum first to educate myself on how best to finance an apartment complex. I may be posting about that soon. 

Thank you everyone that responded, I appreciate you.

@Nick BelskyI am rethinking my ask now. From all the phone calls and emails I have sent, it doesn't appear that I can tap into my current equity without refinancing and losing the low interest rates I have. What appears to be on the table are the three properties I didn't refinance. I can do a standard refinance of two of them and use the money to pay off the third and still have some money left to add towards a new purchase. If I do that, I will be back at 10 financed properties quickly. My other option on the table is to cash out refinance 2 or the three properties as interest only loan. It will be a non-reported loan so in theory I will have 2spots open up. I have never done an interest only loan so I am trying to figure out all the implications before making a decision. 


If you have other suggestions, I am currently open to hearing suggestions.

@Matt Greer, I have but haven't had much success. I did find a company that will do interest only portfolio lending. I haven't done that before so I am continuing to explore other options while I give that option more thought. 

@Tom S. It feels like looking for needle in a haystack. 

Originally posted by @Kerry Baird:

HELOCs for investment properties:

The DTI percentage range varies by lender, and is less than what you will find for an owner occupied property, due to lender risk. While qualifying for a HELOC is dependent on your home equity and your credit score, good or excellent credit makes it easier to qualify. A good average to shoot for is 620 or higher. Plus, the better your credit score, the better your interest rate.

Ridge Lending All in One, first position HELOC

AFCU does 80% LTV on NOO. Utah

Americafirst 80% LTV on noo 65% LTV Utah

Arvest Bank AR, OK, AL, MO

Bank of Souther California

Bank of West (BNP Paribas) 60% LTV ELOCs

BB&T will loan on a rental portfolio

BBVA, now PNC

Bellwether NH and MA 85% to 100%, draw 10 yrs

BMO Harris, 3 HELOCs to 70% LTV

Boeing employee credit union

California: Cal Coast Credit Union and Fremont Bank

Citizens Bank -Minnesota, only in-state. Kyle Potswald

Citizens first position HELOC

CMG Financial 70% LTV

Consolidated CCU, high LTV NOO LOC, OR, WA

East West Bank, up to 60% LTV with "no docs" San Fran area

Figure 80% on a rental, not in LLC

FirstBank CO and AZ 75% LTV

First Florida Credit Union https://firstflorida.cumortgag...

First Commonwealth

First Midwest, up to 90% Chicago area

First Tech Federal. Wester states. Up to 80% if FICO is over 780, no appraisal under $250k value.

First Republic - California

Fulton Bank

GFA Federal Credit Union 10 yr draw, 10 yr repay, MA

Granite State CU, NH 90-100%

Great Lakes Credit Union

Hanscom FCU, Florida

HSBC 70%, for premier clients only

Horizon, Kalamazoo Michigan

Huntington 75% LTV 5 yr IO product available. Someone reported 80%…need confirmation

Hurst Lending and Insurance Investment property HELOC in Texas. No seasoning. Bridge, portfolio, foreign national and other specialty loan products.

Key Bank, FLorida flexible lender, HELOCs on second

homes and rental properties. 90% LTV on primary.

Merchants Bank MN See Pavel Ushakov

Mountain America Credit Union in Utah, Idaho, Montana, Nevada, Arizona, New Mexico. 85% LTV, promo rate of 1.99%. Can refinance an existing mortgage on investment property to a shorter term "Mini Mortgage."

Navy Federal 80% LTV

Norway Savings Bank, Maine

PenFed - max 3 other properties, including primary. 80% LTV, prime + 1%, <4 properties

Quorum Federal Credit Union 80% LTV, owned by LLC is OK. Very flexible lender. NY. Tiffany Mazzoccoli. 2021

Regions- yes HELOC but no LOC

River Bank & Trust, AL

SCCU Florida 70% LTV, 6.25% interest only, not LLC

SECU NC 65% LTV rate 2.75% Oct 2021

Signature Federal Credit Union 75% LTV

Silvergate Bank

Sound CU "non-owner occupied HELOC, capped at $150K and interest rates are prime + 2%, 3% or 4%, based on credit, not to exceed 70% ltv."

S&T Pennsylvania

TCF Bank

TD Bank 75% line with FICO about 740

TIAA Direct was EverBank

Torrey Pines Bank

Troy Bank & Trust, AL

Trustco

Union Bank, specializes in noo HELOC. KCMO, NE

Union Bank, MUFG.

Upstate Bank in Rochester NY, LOC up to 80%

US Bank 80%

Vectra Bank - Colo

Veritex, Texas HELOC

WellsFargo 60% LTV

Workers Credit Union, MA 80-100%

WSFS...up to 70% on rental

Zions Bank, Utah

 Thanks for the list Kerry. I bank with Wells Fargo and they have temporarily stopped HELOCs due to Covid-19. I will work my way through your list to see if I will have better luck with these other banks. 

Post: How can I use equity across 11 res units without refinancing each

Emmanuel N OkaforPosted
  • Rental Property Investor
  • Texas
  • Posts 32
  • Votes 26
Originally posted by @John Warren:

@Emmanuel N Okafor congratulations on the success you have had thus far in your journey! As you look to make the jump to commercial, it will be a mind set shift for sure. The interest rates and terms are going to look less attractive in the sub 1 million dollar loan space. 

If I were in your shoes, I would think about flipping one or two of your less desirable homes to capture the equity. I know there is a lot of focus on using those "golden ticket" conventional loans, but once you jump into multi units it is just so much more scalable. Also, the financing on larger multifamily buildings is actually more attractive in a lot of ways than single family homes right now. 

Thanks for the suggestion John. I have considered selling my less desirable properties but that wouldn't raise enough capital to do what I want to do. Most of my equity are in my very desirable properties. The other alternative plan I have considered is finding a portfolio lender that will allow me to continue buying single family rentals at decent interest rates. My cash flow is currently $75K, if I could get it to six figures I may be able to enter the commercial space sooner using my cash flow. I haven't had success finding a portfolio lender.

Originally posted by @Chris Bang:

Hi Emmanuel, native Texan here and just wanted to reply as I own a mortgage co that handles DSCR and blanket financing options such as what you are describing (11 properties, one loan, etc). This certainly isn't the norm with most banks!

Tell me more about how that works at your company and are there certain types of banks or lenders I should focus on for this type of financing?

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