Investment Mortgage Guy » Investment Mortgage Financing

Creative New Construction Financing for Apartment Buildings to Maximize your Investment

admin — Fri, 11 Nov 2011 15:12:40 +0000

To qualify, most banks are looking for a 70% loan to value ratio based upon the lower of the appraised value or cost to build a new construction apartment building in Minneapolis. For example, if you have a project cost of $2,000,000, you will need to plunk down $600k to get your financing. Most of the time, that 600k in equity becomes invested in the deal. With our financing package, we will lend you the full $2,000,000 and ask you to put the $600k in a collateral account at the bank. You can’t access the funds until the construction loan is paid off however you can keep it on your balance sheet as an asset. The construction loan will last 12 to 36 months depending the size of the project.

After the construction is up and running, we will work you to get your project approved for a high loan to value Fannie Mae or FHA take out loan. We have relationships with various take out sources to ensure you get a competitive rate and term package. The goal of course is to get you a take-out loan as close as we can to the $2,000,000 so you can get as much of the $600k back as possible. By working hard to maximize rents and minimize expenses in the early period of your project, we can get you a higher loan amount. We also work with you to keep your balance sheet in order so that the Fannie and FHA sources are comfortable with you. Once the construction loan is paid off, the $600k comes back to you or a portion may be used to fund the final payoff owed on the construction loan.

If you have a apartment project your trying to get funding for, please call Robert J Bonahoom at 651-485-3710.

Robert J Bonahoom

Nmls#209013

How to Get Approved with Fannie Mae on an Apartment Building

admin — Fri, 04 Nov 2011 05:34:22 +0000

Fannie Mae offers very competitive financing on apartment buildings in the Minneapolis and St Paul area. Fannie offers 3year, 5year 7 year and 10 year balloons with 30 year amortizations at rates most local banks can’t compete with. Local banks are not normally set up to offer Fannie Mae financing like they can in the residential market. You have to find a good mortgage broker or shop online directly to find lenders that can offer these products. When you do, here are some of the requirements:

1) At least 2 years experience owning another property like the one you want to purchase or refinance

2) A new worth equal to the loan amount

3) 9 months PITI reserves

4) Loan amounts of a million dollars or more

5) A 680 credit Score

Fannie will go to 80% on a refinance or purchase and 75% on a cash-out refinance. In most cases, a replacement reserve fund will be required to be set up. This is a separateaccount you will have with your lender to take care of repairs and maintenance issues on the building. Normally, $250 per unit per year will be escrowed to be used at your disposal. Closings can ussually happen within 60 days from when the letter of intent has been issued. Normal fees will look something like this:

Appraisal, Environmental and Legal fees – $12,000

1% Origination fee

Title will depend upon loan amount.

Normally there is a fee to get started of about $4500. This will go towards the appraisal, environmental and legals fees.

For a free no hassle evaluation to see if your eligible for Fannie, give me a call 651-485-3710

Robert J Bonahoom

NMLS#209013

Why Increasing Cap rates and Decreasing Interest rate Equal Opportunity for Apartment Owners in Minneapolis

admin — Sun, 30 Oct 2011 00:40:47 +0000

According to a recent report by Marcus and Milichap, the average cap rate on an apartment building in Minneapolis rose 80 basis points to the low 8 percent range during the last 12 months. The best class A apartment buildings in Minneapolis are in the 5 to 6 percent range and the some class C properties could be in the 10 percent plus range. The capitalization rate or “Cap Rate” as most of us call it is a simple calculation many investors will use to analyze a building very quickly. A cap rate is determined by taking a building’s net income and dividing by the building’s purchase price. The net income of a building is determined by taking the buildings net rents and subtracting operating expense. Please note, the debt expense of the building is not figured into this equation. Common operating expenses include taxes, insurance, utilities, repairs, marketing and management.

Below is the formula……

Cap Rate = Property’s net income divded by the current value

Okay, so that’s my explanation of cap rate, and as I said, it’s increasing. Let’s use this example, Building A has a cap rate of 7.5%

See below…

Purchase Price – 5,000,000 Net income – $375,000

If we add the 80 basis points and make the cap rate 8.3% let’s see what happens…

Purchase Price – $5,000,000

Net Income – $415,000 That’s another $40,000 to service debt with or put in your pocket!

Now let’s look at what is going on with apartment building mortgages in Minneapolis…. Vacancy rates are below 3% almost everywhere in the Twin Cities and lenders are motivated to write loans again. Agency financing which is FHA, Fannie Mae and Freddie Mac) accounted for 52% of the loans originated the Minneapolis and St Paul Area. The average interest rate this year for these loans was 4.5%. This is down about 50 basis points from a year ago when the rates average in the low 5% range. Banks and Insurance companies are also in the hunt again and ready to step up to the plate and make deals happen. So let’s say a buyer bought this $5,000,000 building with 25% down. His loan would be for 3,750,000. At 5% the annual debt service would be $241,560. If we lower that rate to 4.5%, the annual debt service becomes $228,000. That’s a savings of $13,560 per year! Combined, the increase in cap rate and decrease in rates give an investor a possible increase in investment of $53,560 per year! I don’t know what that sounds like to you, but to me, it sounds pretty good! Current apartment building owners in Minneapolis can benefit from this by refinancing and improving their net income through lower vacancies and being more efficient with expenses. If you’ve been a apartment building owner for a while, this business sure has been it’s ups and downs, for now, let’s enjoy the upside!

Robert J Bonahoom

NMLS#209013

651-485-3710

How to Get the Most Accurate Rate Quote on your Apartment Building Financing

admin — Sat, 08 Oct 2011 02:12:57 +0000

Many investors are taking advantage of the incredibly low interests rates right now on their apartment building financing in Minneapolis. Having all your documentation together is key for an accurate quote. Here is a list of items to help you prepare:

1) Description of your building – Number is units, photo’s, age and mixture of units.

2) Current Rent Roll – (also list any subsidized units)

3) Year to date operating statement and previous two years operating statement.

4) Personal Financial Statement

5) Last two years tax returns and W-2′s

6) Resume

If you can include the above information, your lender should be able to get you an accurate quote. If you are interested in a free no hassle quote, please contact Robert J Bonahoom at 651-485-3710 or email at rbonahoom@houseloan.com NMLS #209013

Refinance Your Apartment Building in Minneapolis Today!

admin — Fri, 23 Sep 2011 04:35:13 +0000

Rates for apartment building loans are seeing record lows. With vacancy rates in Minneapolis and St Paul approaching zero, banks are eager to help landlords put new financing on their properties.

Here are some same rates on September 22nd

FHA – 4.25%

Fannie Mae 5 year fixed – 3.75%, 7 year fixed 4.25% and 10 year fixed 4.75%.

Portfolio loans starting at 4%

Whether you own a small 5 unit building or have 200 units, Robert Bonahoom and Angela Christianson have an outlet for you. Fast service and no bull.

For a free quote please send us the following:

1) Personal Financial Statement

2) Operating Statements YTD, 2010 and 2009

3) Current Rent Roll

Call us with questions at 651-485-3710 or email us at rbonahoom@houseloan.com

Robert J Bonahoom

Senior Loan Officer NMLS#209013

Apartment Loans Made Easy

admin — Fri, 16 Sep 2011 16:07:43 +0000

Stan is a local apartment building owner with a nice 10 unit building in St Paul. His mortgage was on a 5 year balloon and was approaching it’s term so he figured it was time to get with the banker to renew the loan for another 5 years. He figured this process would be fairly easy, after all, he’s always made his payments on time and has a solid equity position on the building. Stan approaches his banker who says “sure we can help you” . After 2 months of getting the banker a ton of paperwork than was more painful this his annual doctor visit, Stan patiently waited for the committee to approve his loan for another 5 years. Much to Stan’s dismay however, his banker calls after two months to tell him the bank would simply like to be paid off and doesn’t want to “entertain” another 5 year extension. Apparently Stan’s bank has lost it’s appeitie for these types of loans. Stan scratches his head and says what type of loans do you guys want? I’ve made every payment on time. Now in a panic, he wonders what do to… Does he risk losing the building? Are banks not lending anymore even to good customers?

If you have found yourself in a situation similar to Stan, please look no further. We can help. My partner, Angela Christianson and myself have devoted countless hours to building relationships with Fannie, FHA, insurance companies and large and small banks to step in where your lender has fallen short. We have solid lending solutions for apartment buildings large and small. Our normal process is to get you a quote within 24 hours of submitting the operating statements to us and a full underwriting commitment can be done on most loans in 7 days. Through our relationships, we know who is lending and who isn’t. Many times banks goals and lending desires change. Angela and I stay on top of this market to see who is doing what so you don’t have to. If you have an apartment building large or small in the Twin Cities were urge you to give us a call. Please call Robert J Bonahom at 651-485-3710 or email at rbonahoom@houseloan.com.

Robert J Bonahoom

Senior Loan Officer Cornerstone Mortgage NMLS#209013

Where is the Next Pot of Gold in the Twin Cities Market?

admin — Thu, 18 Mar 2010 04:25:16 +0000

I watched a lot of investors take advantage of some incredible deals in Minneapolis during early 2009. Homes were priced from $5000 to $40,000. The cash flow was insane. Slowly but surely however, these opportunities have been drying up. More and more investors have been brought into the mix and made the competition for the good deals fierce and scarce. The party seems to be over. Has the ship set sail on great opportunities in the Twin Cities?

I hope not but I think you will need to find other kinds of opportunities to focus on. The next wave of foreclosures is coming, but it won’t be in the same areas as before. The Minnesota Home Ownership Center posted an interesting blog article about the next wave of foreclosures.

Click Here to Read Article

According to this article, the suburban communities in the Twin Cities have a large number of homes the have the dreaded “Option Arm Mortgages” that are due to reset in 2010. Statistically, these mortgages have a default rate as high as 80%.

Realtor/Blogger/Investor Scott Ficek is taking aim at where he thinks the next pot of money will be made. (He was certainly right the first time around with Minneapolis) He is doing a seminar at our office in Burnsviile next week entitled “Renting Homes for more than $1500 plus per month.” His new strategy is to focus on higher priced homes with bigger rents and bigger upside potential.

Check out Seminar Here:

There is going to be some great deals on homes between $300,000 on up. The cash flow on these larger home purchases won’t be as good as the little guys, but if this market ever turns around, the appreciation could be really attractive.

Happy Investing!

The Median Home Prices in the Twin Cities Increase

admin — Tue, 16 Mar 2010 04:38:13 +0000

According to the Star and Tribune, median homes prices for the Twin Cities increased from $150,000 in February of 2009 to $159,000 in February of 2010. In general, I agree with the article. I think we will see the median home prices continue to rise as the foreclosures move from inner city properties to the suburban communities. This doesn’t mean that homes in your neighborhood are going to increase anytime soon. The median is the average of all homes. As larger homes start to get resold through the foreclosure process, the median home prices will also increase. It’s a healthy sign that housing is recovering. As we see signs of recovery, interest rates will rise and lending guidelines will loosen.

Read Full Article Below:
Star Tribune Article on Housing

Wells Fargo Exits the Investment Property Loan Market

admin — Sat, 13 Mar 2010 22:47:47 +0000

I got into work on Monday and see an urgent email from our secondary marketing department (the department at our company that works with all of our lenders) that stated Wells Fargo was not going to purchase ANY more of our Non-Owner Occupied Loans. Even the ones we had already locked! Apparently with the new RESPA laws that went into place, they are concerned that they may improperly classify a loan as an investment property that might actually be a second home where tighter regulations are required. The new RESPA law states that if there is a change in the Truth in Lending document that is greater than .125%, you must re-disclose this change to the client. Income producing loans (or investment property loans) are excluded from having to re-disclose. Wells is nervous that they may have to classify a loan as an investment property for underwriting purposes but in reality it’s a second home to the borrower. If there is a change on the Truth in Lending of more than .125% in this case, the borrower may be in a strong position to state Wells violated the RESPA law. Wells has decided to take the conservative approach with some of it correspondent channels. All retail departments and some correspondent channels remain unchanged. (And are still writing investment property loans) So far, no other major lenders have gone similar policy.

This is just one more example of how Government intervention is changing the appetite for lending.

Refinancing Your Investment Property with DU Refi Plus

admin — Wed, 02 Dec 2009 04:53:47 +0000

Many investors have contacted me with the drop in interest rates to see if I can help them refinance their investment property. Unfortunately for most, the equity position in their property is too negative for me too help. Fannie Mae however, has implemented a program called DU Refi Plus to try and help the real estate investor take advantage of these lower rates through refinancing. If your loan is currently backed by Fannie Mae, (to find out if your loan is backed by Fannie Mae Click Here) my firm will go up to a 95% Loan to current value and refinance your loan without any mortgage insurance.

Here are some of the stipulations and highlights:

* No Mortgage lates in the last 12 months.

* No limit on the number of financed properties you currently have – This is really nice!

* Your current mortgage cannot have mortgage insurance on it or you have to contact your current servicer for the refinance.

To get a quick estimate of your property’s current value, I like to go to www.zillow.com

This program will benefit only a small handful of the investors out there looking for low long-term rates, however, maybe your one of the lucky ones who will fit.

For an analysis of your property, please give me a call at 651-485-3710.