Archive for Commercial Real Estate Definitions
Question From the Audience: What are Lenders Looking For When It Comes to Apartments
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Fannie Mae Lending Criteria - this one is a slam dunk!
Greetings….
Two blog posts in one week…..just amazing!
Well…not really.
Anyway….
Got a great question from Steve in Colorado regarding lenders and lending criteria. My friend Terry Painter from the Business Loan Store provided us an answer……
Rob,
I know some investors try to stay away from flat-roof apartment buildings (vs pitched). In
general I’d prefer pitched but might consider flat especially if new roof or
other big benefit. However I also heard (not sure if correct) that Fannie
Mae does not fund flat-roofed apartments. If this is true this could make it a definite
typical “requirement”. Any comments?Also, any comments on what lenders look for regarding unit mix % ratio (this is the % of one bedrooms, two bedrooms, studios, etc) to look out for (with desire for higher mix of two bedrooms vs. one)?
Steve,
Fannie Mae does fund Apartment complexes with flat roofs. But, we (Business Loan Store) are funding
several with flat roofs now. If any roof has less than 5 years useful life left this will be a problem. Without question flat roofs do not last anywhere near as long as pitched roofs and are more expensive to maintain.As for unit mix, preferable unit mix is based on the sub market the property is located.
For example, if there are a lot of students, one bedrooms and studios are often preferred. Otherwise in most locations, more 2 bedrooms are
preferred. Usually one bedrooms and studios get the highest rent per SF.
So in locations that have very low vacancy, studios and one bedrooms could bring in the highest
income.Terry Painter, President
Business Loan Store
104 Monterey Drive
Medford, OR 97504
Mortgage BankerOffice 541-326-0570
Fax 888-404-7089
Cell 541-840-3078learn anything new?
Until next time…..rob
Real Estate Investing: Another Apartment Purchase This Time with a Bank Approved Wrap!
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Greetings from the metropolis of Cedar Crest, NM!
The Bank Allowed What?
Wow…has is been a long time or what? I have been so busy with a real estate class (six weeks) and purchased an apartment building within the same time frame. Just plain crazy so a lot of things got neglected…especially this blog. Looks like we have another apartment building in the works (thanks to KB Realty)….things are looking busy for the next few months…at least I hope!
Anyway….
There is one thing I never heard of when it comes to investing… A Bank Approved Wrap. BUT this one thing is a HUGE deal. I have done several wraps before…..but never a bank approved wrap. Now…remember…a wrap is when you “wrap” an existing mortgage with a brand new mortgage. Read more about wraps HERE.
So what is the big deal? Well, usually on wraps, there is always a small risk that the loan can be called due to the fact that the asset has been sold yet the loan is still in place. This is a small risk because banks usually do not exercise the “due on sale” clause call if the loan is in good standing. In other words, the payments are still coming in on time. But…there is always a chance. In any case, when we first approached the seller, the seller did a “no no” and asked if the lender if it would be okay to wrap the note. Surprisingly, the lender said “yes”…..at first I thought there was a mistake….and I just felt someone misunderstood something. But….I was wrong. So, in the last week of December, we closed on an apartment building with only about 6% into the deal (commissions and closing costs). No joke!
I even talked to my lender friends….they all NEVER heard of of such a thing….especially in commercial.
The beauty of the deal was that it was 80% occupied and still cash flowing. The issue with the property was mismanagement. Bad management with out-of-town owners is a great formula for opportunity.
Now…I have to give credit where credit is due. Preston from KB Realty found this deal and made it happen. James, a.k.a. “J” our attorney, worked hard during Christmas to get things right. Having solid relationships was the only way to get this done….but I digress.
There were problems with the deal….more specifically, timing. The sellers wanted to close before December 31, 2009….which only gave less than 30 days to close. Now…. trying to close in 30 days during the holidays is impossible….so I thought. I told Preston “there was NO WAY we could do it.” Due diligence, attorneys, inspectors, banks, title companies….are hard to round up to work on a project anytime of the year….especially during the holidays….Forget about it! Well…Preston pushed and pushed and the rest is history.
My partners and I learned something…..we don’t know everything…but thinking we do can lose us opportunities.
Thanks to Preston…David….J….
On to the next project!