All Forum Posts by: Ian Stuart

Dude just wait until Congress passes UBI. Values are going to skyrocket. You though 4-10 unit deals in Seattle were expensive now? Just wait until sellers realize their tenants are sitting on $2-4K/mo. in unearned income. Everyone's going to be "updating their models" when that goes down. 

Forward thinking - apartments are cheap.

Is my opinion biased because I'm a mortgage banker who gets paid a percentage of the loan UPB? Absolutely.

Does that diminish the validity of what I'm saying? Not so much. 

If you can get up to 20% down - Fannie Mae, Freddie Mac, and the local banks will be able to be competitive on rate and interest only. With HUD you're probably doing a 223(f), so the 35 years of amortization is nice vs. an agency (Freddie/Fannie) 30 year amortization. That said - the agencies will get you 5 years of IO on a fully levered (75%-80% LTV) deal which will help your cash flow at a 3.40% - 3.75% rate in top markets.

FYI - you'll need to be able to prove 100% loan amount net worth and 9 months amortizing payments liquidity to qualify for a Fannie / Freddie deal. Fortunately you can spread this out over multiple guarantors - you alone don't need to be able to come up with this financial backstop, but your team of partners as an aggregate group does. 

IDK what your prepay is on the HUD deal, but if you just did the deal 1-4 years ago, might be best to wait till your massive prepay comes back down to earth so you don't get clobbered on the settlement statement.

Plus that insane HUD leverage.... but then again you probably have MIP if you're really levering it up.

Feel free to call / email anytime during biz hours 9AM - 5PM PST. 

Cheers, 

Ian

Hi Shawn: 

I've underwritten and originated over $800M in Fannie Mae / Freddie Mac / HUD multifamily mortgages over the last four years and am active in the WA, ID, CA, MT, AZ, TX, CO, UT, NM (West Coast States). All I do is multifamily - average deal size $12M, but also provide Fannie Small Loans / Freddie Small Balance Loans $1-7.5M. Have contacts in the regional bank space here on the West Coast also (Banner / Umpqua / Opus / US Bank / BECU / Etc). Can turn around fully-vetted quotes in 2-3 biz days after receipt of rough financials and provide detailed estimated settlement statement costs to your cash on cash / IRR modelling.

Primarily work with institutional syndicators but always happy to weigh in and provide insight and market data from CoStar / Yardi / REIS / Axiometrics if you need it. 

Best, 

Ian 

The "off the top of the head intuitive answer is yes, pay off all of your debts before you star investing seriously. Debt just eats into your asset's ability to generate future income. Trust me, I'm a Freddie Mac / Fannie Mae multifamily lender...

That being said, it entirely depends on how you invest the money that you would alternatively put towards your down payment. If you are investing your money (that would alternatively be used towards a larger down payment) in the stock market at a 5.5% annual clip, and have a loan at 3.50% - take out the loan! you can net the additional 2.00% in between your stock returns and the loan interest. 

All depends on your confidence to be able to generate that return above your mortgage interest rate. Trust yourself!

Absolutely not. Do not be worried. 

Be greedy when the market is fearful. Be fearful when the market is greedy. Great buying opportunity. 

In addition - coronavirus fears are making investors pile into treasuries, which is driving rates down. Great time to refi or take out a bridge loan for that capex plan you've been sitting on for a couple years. 

I predict selloff in early trading Monday morning, followed by a rally through close. Doesn't hurt to have gold bullion in the safe in case this truly gets out of hand though. 

J-Pow has indicated that he'll cut rates if things get out of hand. Not exactly the Fed's jurisdiction in my opinion - putting a lot of booze in the punch bowl the keep the party going, but would be long in the event of any coronavirus pullback. 
 

@Matthew Orton

You're going to want to hire a dedicated and experienced student housing manager if this deal is true 50%+ concentration of students.

For starters, talk to the big dogs: 

1. Campus Advantage: https://campusadv.com/

2. American Campus Communities: https://www.americancampus.com

3. CA Student Living: https://ca-ventures.com/

4. EDR / Greystar: http://www.edrtrust.com/

5. Homestead U: https://www.homestead-u.com/

We've done business with The Cardinal Group and Horizon Realty Advisors also, but I believe they only manage their own assets - and are not for hire third party managers.

Are you buying the Waco deal all cash, or financing it? We've financed student deals around UT, A&M, Baylor, and Rice - and all over the West Coast. Freddie Mac or Fannie Mae Student Housing loan programs - 80% LTV; 1.30x DCR on a 7+ year deal with partial term IO and 30 year amortization. Let me know if you'd like to run any quotes.

@Daniel Alzate Our team in Seattle has done a few multifamily deals in Florida with Fannie and Freddie. Typically for principals who are running a fund and syndicating deals on the East Coast. 

Berkadia does a significant amount of loan volume in South Florida - well over $20B since inception, and that's just the Jacksonville office. 

If you ever need asset or market data, let me know and I'll get it for you. We have access to CoStar, REIS, Yardi, Axiometrics, etc. The beauty of working for a Berkshire Hathaway owned mortgage banking company is that we have tons of resources at our fingertips. 

@Daniel Alzate Model to Year 1 taxes, always. First though - do your DD and identify whether or not your deal is located in a disclosure state or non-disclosure state. 

In disclosure states, sales prices need to be reported. As a result, the local county assessor will likely keep assessed values (and thus - property taxes) somewhat aligned with sales prices. For example - here in King County, WA (Seattle/Bellevue) - most deals reassess between 90% - 100% of purchase price (sometimes more). As a result of the post-sale reassessements, your tax bill will rise significantly. However - in some disclosure states (think AZ and OR) - assessed value growth is limited to a certain % rate. In Oregon, Measure 50 limits assessed value growth to 3.00%/year. In AZ - 5.00%. 

In non-disclosure states, sale prices do not need to be reported. As a result - in many instances - assessed values do not immediately pop post-sale the way they do in disclosure states such as Washington. A couple examples of non-disclosure 
states include Idaho, Montana. Appraisers typically adjust their Year 1 proformas up by 3-5% depending on where the tax comps (properties of similar vintage, size, location) are assessed. 

Every county is different, and your lender (if they are any good) will do a tax analysis based on tax comps, pre/post sale reassessments, etc. before quoting your loan, and running their tax number by a trusted local appraiser. Your appraiser will underwrite to Year 1 tax in their proforma, as will your lender. 

Taxes are your largest line item expense. Be smart - underwrite them conservatively to Year 1, and trend them in your IRR model to align with market historicals.

If you work with the dual agent - you're definitely more likely to be awarded the deal! On the multifamily side - on small deals - the Marcus & Millichap guys are trained to push deals towards buyers who write their offers through their office. You get a better shot of being awarded the deal if you work through them. In red hot markets similar to the ones you describe, working with the listing agent to "double end" the deal will give you a better chance - especially if your competing against a buyer pool that's paying all cash, going hard on earnest money early, and promising quick DD, etc. 

@Cory Janson

Here are the people you want to network with.

1. Existing Owners: Networking with existing owners is a great first step. Meetups, local conferences, cold calling them to set up a coffee meeting, etc. If you develop strong relationships with existing owners, you have a shot at convincing them that you are a competent buyer. Thus, you may be able to arrange an off market deal and cut out the broker.

2. Investment Sales Listing Brokers: Listing brokers have inventory, and can provide you with deal exposure - as long as you don’t waste their time or ask too many “newbie” questions. That said, some of the deal hungry young brokers at M&M I’m sure would be more than happy to explain what a “cap rate” is if it means you’ll use them to write an offer on their senior’s listing.

3. Investment Sales Buy Side Brokers: If you want someone to hunt for deals for you, not a bad idea to find a buy side broker to look around once you convince them that you’re for real. That said, they’ll want to know that you have some experience / experienced partner, ample equity, a lender in tow, etc. Again, nobody is going to go out of their way to show deals to a tire kicker who’s just checking out the merch. Brokers and existing owners alike want motivated buyers willing to write an offer, put up earnest money and go hard, with a business plan and DD timeline put together, their equity lined up, and a lender in tow.

3. Lenders: If youre interested in a deal, have your lender run the numbers and quote your acquisition loan immediately so you know how much equity you need to come up with. Having loan quotes ready to go shows sellers and brokers that you’re serious about buying, and have thought it through.

If it’s your first deal, make sure you are as prepared as possible. Line up your equity partners, lender, deal type, and business plan in advance. Then start calling off market to set meeting with owners or start talking to brokers.

If you find a deal you like, write an offer with aggressive terms and tie it up. Know the DD timeline, get your reports done, get your loan under app, and crank it out.

At the end of the day, people want to know that you’re not wasting their time and are prepared to act decisively.