All Forum Posts by: Stuart Udis

The current interest rate environment has made financing real estate a challenge. It now appears interest rates will remain higher for longer than most expected and decided to use this forum as an opportunity for members to share strategies and resources used to navigate the challenges brought on by the higher interest rates. On a personal level, I have found rental properties that seem to have everything going for them (new construction w/ low operating expenses, 10- year tax abatement etc.) are being limited to 60-65% LTV as the 1.2-1.25 DSCR lenders rely on are impacted greatly by the interest rate component in their analysis. Therefore on refinances I am experiencing more equity left in deals and on new acquisitions more equity being required. Some initial ideas that have come to mind are to seek out lenders who may lean less heavily on DSCR (although I am finding this to be a backstop all lenders I have engaged rely on), utilizing more LP equity on new acquisitions, and incurring higher finance charges to originate loans where lower or no pre-payment penalties exist to provide the greatest flexibility to exit any recently originated loans when rates calm. Setting aside the interest rates, I am finding opportunities I perceive to be good value, and it's just a matter of navigating the next few years. Interested in hearing how others are navigating the financing and capital stacks in their transactions.

There are plenty of traditional banks/lenders who will finance rental properties at your desired interest rate. The lenders will require a personal guarantee on the loan but I see no reason why the property can't be titled to an LLC. However in the current interest rate environment, rate alone should not be your sole focus. For example, it may ultimately be more cost effective to incur slightly higher finance charges if the loan has no pre-payment penalties compared to another loan that may. Presumably, most investors will decide to refinance properties that are financed during this period once interest rates calm but if there's a large pre-payment penalty, refinancing to a lower rate may not be a cost effective solution. Therefore flexibility should be prioritized.

This might trigger a zoning refusal. What is the property address? Having an understanding of the underlying zoning will be helpful in analyzing your situation.

You need to consider your exit when making this purchase. I am not particularly knowledgeable of Marlton and believe others can shed additional light on the market conditions in this particular area However generally speaking I believe the location of the property is critical as well as whether you are acquiring a single family house or multi-family building.  Focusing first on SF homes,  3 bedroom homes regardless of the neighborhood are more likely to provide for an exit to a home owner whereas a 2 BR home in most neighborhood will likely attract an investor. As for a multi-family building, unless you are near a school and anticipate student tenants, 2 BR units are more marketable. The one exception would be a building that has an eventual exit as condos. Then 3 BR units might make more sense.

First in terms of the violation fees, you should have received a Certification Statement prior to settlement which would have disclosed violations. It would have offered you advanced notice and possibly an opportunity to clear them prior to settlement. Is your Architect willing to submit the permit application? I would highly recommend this, especially given this appears to be more than an EZ permit. As long as the architect has a copy of your GC's insurance, Contractor License & Tax Clearance Certificate he or she should have no issue submitting the permit application. As for the rental license  request,  this is a bit puzzling.  Are you certain a zoning use permit was not requested? Typically a use permit is a prerequisite for a building permit being issued. Based on your comment of it being a large RM1 lot, it appears the parcel likely satisfies the lot area requirement for a 3 Family building. However, if this property was rezoned RM1 recently and was not a legal 3 Family dwelling previously, a zoning permit will certainly be required. I believe your architect should be the person in contact with L&I. 

We would like to connect with funding sources interested in participating as preferred equity in the capital stack for shovel ready projects in Philadelphia. Sponsor to guarantee construction loans at 80% LTC and Pref equity not to exceed 65% LTV. New construction projects in sought after markets including Italian Market, Mt. Airy, Fairmount, Penn Alexander Catchment and Loft District. In most cases, value created through use and dimensional zoning relief.

The fact you are looking to utilize potential refinance proceeds to acquire additional properties without involving your parents is troubling. I believe your parents should be the ones securing legal counsel.

Lincoln,

Even if the properties are transferred for a nominal amount, the transfer will trigger transfer taxes based on the properties assessed values. Another consideration is whether these properties have existing loans. This will complicate the transfers. I am also struggling to understand the reason for the proposed transfer as I am having difficulty understanding the benefits your parents receive. You mentioned good income and credit in your initial post. Perhaps if the properties currently have no debt or debt with low LTV's, in return for the transfer and 30% ownership, you can serve as the guarantor for loans for each property and the refinance proceeds could be re-invested into additional properties whereby your parents would have ownership interest. This could be an arrangement that's beneficial for all parties.

In our particular case, the parcel was developed as a 4 unit condo building. However, due to the 20% open area requirement in the RM1 district we had open area in the rear of the parcel. This space was more valuable as parking.

Miles,

You will need streets department approvals and will need a zoning permit for the use. Most zoning districts do not permit surface parking as a matter of right. Therefore, you will more than likely generate a refusal for the use and potentially a second refusal if the proposed parking space does not meet the required dimensional standards. We recently obtained relief legalizing two surface parking spaces on a corner parcel in Fairmount. Would be happy to share more details on the process and look into your particular case.

Stuart