Your lender brings a huge amount of capital to your transaction. They are a critical member of your success team. You need to understand what’s important to the lender and how they will structure your loan. In today’s podcast, we sit down with a few team members of Old Capital and discuss what’s new in the capital markets and what you need to know. Items discussed:
1. Fannie Mae Pricing Waivers- for the last few years, Fannie has been generous in reducing their posted interest rates to good clients. Today, Fannie Mae is not too anxious to offer lower interest rates to new and inexperienced borrowers at the highest loan leverage.
2. Term Sheets vs. Final Loan Commitment- Some lenders are not fully underwriting the loan transaction upfront and issuing false term sheets. They propose loan terms that are not even close to what the final loan commitment will eventually be. Don’t fall for that, always ask for your lenders underwriting analysis upfront and find out how they view the transaction. Fannie’s underwriting criteria is pretty much the same from DUS lender to DUS lender…so term sheets should be very similar. If not, then look into their underwriting.
3.During the loan process, be prepared to bring in additional equity if the seller does not increase the property’s NOI. Unfortunately, many sellers don’t realize that the buyer’s lender needs to see positive NOI during the loan process. Do not have the seller take their foot or the buyer will need to bring in additional equity to close.
4.Always ask for the sellers 5 YEARS- INSURANCE LOSS RUN upfront before you go hard with earnest money. You need to find out if the seller has filed any insurance claims against the subject property. One claim should not increase premiums…but several claims can push up insurance premiums and will reduce your loan amount significantly.
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Are you interested in learning more about how Multifamily Syndications work? Please visit www.spiadvisory.com to learn about Michael's Real Estate Syndication business with SPI Advisory LLC.