All Forum Posts by: Eric Schleif

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.

I've never had a client rely on the "Coke Can Multiplier" to purchase a hotel. As I'm sure you are aware, it's difficult to provide good feedback based on the information provided in your post. I'm assuming you have STR reports for the hotel in question. What did they show? Have any hotels in the comp set been traded recently? How did the trailing 3 years of occupancy and I&E's look for the hotel? What is the cost to renovate the hotel and how would do the pro forma numbers look when the hotel is stabilized? Is it flagged and is there any PIP work required? Any reason for the uptick in occupancy? Did the area lose hotel supply or was there a economic factor?

10% liquidity on a $1,000,000 loan is just 10% x $1,000,000 which equals $100,000.

Debt coverage is calculated by dividing the Net Operating Income (NOI) by the annual debt service (mortgage payments).

So a $1MM loan at 4% with 30 year amortization would require an NOI of about 71,800 to hit 1.25.

The annual mortgage payments in this scenario are $57,290.

$71,800/$57,290 = 1.25

Feel free to PM if you want to discuss the deal metrics in further detail.

Good luck.

As others have said, you'll have no issue getting a commercial loan for the condo units. I would definitely keep them as condo units. You should seek bank financing that will allow for condo releases during the term of the loan. That will provide you the ability to sell them of the market heats up during the loan.

HUD's 40 year amortizing loans are geared towards developers for new construction projects. I'm assuming your deal (as most others) would qualify for 35 year amortization. As others have stated, there is time lag to execute a closing, higher fees, and more headaches. @Johnny Wahba I've never heard of a max loan but they typically don't make sense for loans under $10 million. However, there are a few shops that specialize in smaller HUD transactions.

If you are looking for a HUD loan on an acquisition, then the way to go is to use a shop that can provide an acquisition bridge loan while simultaneously underwriting and submitting the deal for a HUD takeout execution. That way you can purchase the property in the standard 60-90 days and refi out to a HUD deal 6-9 months later.

It would be smart to compare this to agency debt. I would assume it may be more attractive than going the HUD route. Feel free to PM me if you'd like to discuss in further detail.

The financing structure you described is unorthodox for hotel development lending, so I think you'd have difficulty finding a lender offer similar terms. It's also difficult to provide some good feedback based on the details in your post because there many variables with hotel construction that will impact pricing. Some quick questions to try and help... What's your total development budget? Where is the project located? Will this be a flagged hotel?Where are you in the process (eg: feasibility study, STR report, plan approvals, permits, etc)?

Good luck.

No problem Joanna. From what you've already stated, I don't think it makes sense to assume the CMBS loan. Before you spend too much time on evaluating the deal I'd speak with the listing agent and ask what the seller's maturity date is on the CMBS loan. If it's a few years away, odds are there is a stiff prepayment penalty that may derail the sale. Feel free to PM if you would like to discuss the deal in further detail.

There aren't many nationwide players in the space you described. All the lenders I know that operate in this SFR niche have minimum loans of $50K or $100K. Best of luck.

I may have a few ideas but would need some more details. PM me if you'd like to talk. Thanks.

Is the seller pushing you to assume the mortgage? There is most certainly a 1% fee to assume the loan and you will go through the same underwriting criteria as your would if you obtained a whole new loan. You may have some savings on third party fees, but that's it. When does the seller's loan mature? The issue here is that the seller is most likely looking at a huge defeasance penalty if he sells the property. If you assume his loan then there is no defeasance penalty. Assuming you're a qualified borrower and the property in question is cash flowing and performing, you can do much better than the current CMBS loan on the open market, especially for a 10 year loan. I would make sure you know all of your options before agreeing to assume to loan. PM me if you'd like to discuss this deal in more detail. Good luck!