While doomsayers have claimed that the multifamily sector has hit its peak and 2018 should start seeing a decline in rents and demand, others are suggesting that the overall trend of the previous years should continue. If the “class half-full” segment of the population is correct, now may be the time to find a commercial real estate lender and finance that multifamily property.
A member of the optimist club, Greg Willet, chief economist for RealPage Inc., was quoted in the National Real Estate Investor, “Overall, we expect that same stability to hold in 2018, with occupancy and rent growth anticipated to basically mirror 2017’s statistics.”
Apartments are going up at a 10-year high—nearly 100,000 per quarter—and yet the occupancy averaged right around 95.6 percent with rates growing at 2.4 percent. Some markets, however, are tough to break in to—specifically the large metro areas. There are, however, sub-markets that may be the place to start for developers that are just getting their feet wet in this arena. This spillover effect seems to be witnessing higher demand and therefore rents in areas such as Tacoma, WA, Lake Nona, FL and Oakland, CA.
Another market to keep your eye on are suburban Class B and C apartments as renters become unable to afford the Class A units. And just what is a multifamily unit? It is a property that has five or more dwellings.
The Biggest Challenge: Finding a commercial real estate lender for your Apartment Building
Currently, the two big lenders—Freddie Mac and Fannie Mae—are financing multifamily units. That, however, could change in the future as speculation continues if they will curtail or even eliminate this segment of their lending portfolio. They have, however, focused on low-income housing needs including smaller properties and the manufactured home communities.
Most commercial real estate lenders for larger properties require higher qualifications. Know your figures and come to the lending table prepared with short and long-term costs and rental estimates.
The 50 percent rule is a good place to start and means that 50 percent of a real estate investment’s income should be spent on expenses and not the mortgage. In addition, you’ll want to know your credit score, income, and have the last two year’s personal and business tax returns on hand. Commercial real estate lenders will want to see two years’ operating statements including net operating income, debt service coverage, and loan-to-value ratio. They will also look to your experience as an owner or manager of a multifamily unit and to the money that you can put down. The good news: Not all lenders abide by these stringent underwriting qualifications. For borrowers that need more flexibility, a hard money lender may be the best choice. At Level 4 Funding, we work with hundreds of private lenders. Because of this, we can offer a loan value up to 90 percent with flexible terms from 3 to 60 months, fixed rates from 7.99 percent APR, and commercial LIBOR+350. Call us today to see if we have the funds you need to purchase your multifamily unit tomorrow.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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