Category Archives: Investment Property Loans

Covid-19 Pandemic Affects Entire Commercial Real Estate Market

The pandemic changed the world in early 2020 as the virus affected every segment of the real estate market.  Social distancing and stay at home mandates had severe effects on real estate.  Retail properties, hotels and motels, and leisure properties in general were decimated, while essential retail, medical offices, and warehouse properties for e-commerce companies did exceedingly well.  Close to a half million people have died from the coronavirus so far, although deaths and hospitalizations have begun to slow down.  The health crisis has caused employers to lay off some workers and force others to work from home.  This has created a major demographic shift in the economy.  This economic uncertainty has caused some households to search for less expensive housing, while others needed larger spaces for work from home and online school.  Due to a reduction in commuting, more people left dense urban areas in favor secondary or tertiary locations.  Public transit levels remain well below pre-Covid levels as fewer people are commuting to work.  Higher unemployment levels and people working from home are causing more people to spend more time at home than ever.  One positive benefit that we are seeing is a surge in new small business start-ups from people working from home.

The economy was relatively healthy heading into 2020.  Corporate profits were high, and companies were sitting on a lot of cash.  Throughout this health crisis, the money supply has remained liquid as the federal government has injected large amounts of cash into the economy with various stimulus measures including the Paycheck Protection Program and the CARES Act.  In response to the coronavirus, the federal government also fast tracked several vaccines for emergency use.  These immunizations are providing a path forward for the economy in general and the real estate market in particular.  Although major uncertainty exists in the market in 2021, we remain hopeful that the real estate market will rebound in the near future.

Whether you are purchasing or refinancing, we have the right solutions available. We will entertain loan requests of all sizes, beginning at $1,000,000. Get started with a Free Loan Quote.

Announcing Our Best Apartment Building Loan Program Ever!

Select Commercial is pleased to announce a new program for the purchase or refinance of apartment buildings with the lowest rates and best terms we have ever offered!

Here are the features and benefits of these loans:

  • 5 year fixed rates as low as 3.05% today.
  • Nationwide lending. Metropolitan markets preferred.
  • Rates fixed for 5, 7, or 10 years.
  • Adjustable rate option after conclusion of initial fixed rate.
  • 30 year amortization.
  • Interest Only payments allowed.
  • Easy step-down prepayment penalties (no yield maintenance or defeasance).
  • Up to 80% LTV ratio.
  • As low as 1.20x debt service coverage ratio.
  • Many prepayment options to choose from.
  • Free rate lock for up to 90 days.
  • Loans from $1,000,000 and up.
  • Conventional multi-family (5+ units), including housing with tax abatements and Section 8 vouchers.
  • Loans for purchase or refinance.
  • Cash-Out refinances acceptable.
  • Non-Recourse
  • Tax escrows, Insurance escrows, and Replacement Reserves may be waived (subject to applicable guidelines).
  • Credit scores as low as 650 acceptable.
  • Very low application fees.

If you have a deal to discuss with us, please feel free to call us at 1-877-548-9454 or click here to complete an online inquiry.

How to Qualify for a Great Rate When Refinancing Your Apartment Building

When it comes to refinancing your Apartment Building the first thing you’ll want to know is how to qualify for the best rate. There may be things that have happened since you financed the building that could negatively affect your ability to refinance. Some of the factors that will be underwritten include: property value, loan-to-value ratio, debt-service-coverage ratio, borrower’s net worth, liquidity, and credit rating. If you are a good candidate for refinancing, your main goal will be to get the lowest rate and best terms possible.

While getting the best rate is very important there are other loan terms that need to be considered. For example: Is the rate fixed or adjustable? Your investment time horizon will help you answer that question. Are you considering selling the property?  If so, the prepayment penalty will be important. Are you looking for a recourse loan or a loan without a personal guarantee? If there are multiple investors involved, it might be best to try to secure a non-recourse loan. What are the fees and closing costs involved in closing? A lower rate might look attractive until you factor in the costs involved. Is your lender capable of closing your loan on the terms promised? Some apartment mortgage lenders do not deliver on their promises and change terms during the underwriting of your loan. Is your lender experienced with apartment lending in your area? You should choose a lender that specializes in apartment loans. These are just some of the issues you should address with the apartment lender you choose to handle your loan application.

 Here are some of the items lenders will consider when they analyze your apartment mortgage application:

  1. Property location – most lenders prefer large metropolitan or suburban areas and don’t consider loans in very rural areas. Loans in rural areas are often considered riskier for lenders as these properties are harder to rent. If your property is in a very rural location, make sure to discuss that with the lender upfront.
  2. Are the tenants signed to leases or are they month-to-month? Is the property subject to high turnover?       Are rental concessions necessary to keep the units filled? Lenders do not like apartments that have to fight to attract and keep tenants.
  3. How is the historical occupancy and cash flow?  Lenders like properties with constant positive cash flow and good occupancy history.  Major fluctuations in cash flow cause concern for lenders.       Lenders like to see occupancy at 90%+. If your property has lower or uneven occupancy, you will need to provide an adequate explanation.
  4. Is the property in good condition or does it need repairs and/or renovation?  A property in need of repairs could create a cash drain and affect the ability to pay the mortgage. Properties in need of work will often lose tenants when newer units come on the market. Make sure to complete major repairs which affect occupancy prior to applying for your loan.
  5. What are the loan to value and debt service coverage ratios?  Underwriters have guidelines which need to be addressed upfront. Most borrowers understand the LTV. The debt service ratio looks at the proposed mortgage payment in relation to the net income. Lenders use this calculation to make sure that adequate cash flow exists.
  6. What is the credit rating of the borrower?  We typically expect to see credit scores above 680.  Lower credit scores will require a solid explanation.
  7. What is net worth of the borrower?  Does the borrower have the ability to withstand a temporary setback?  Lenders like to see a borrower with reserves, or cash liquidity of typically 5-10% of the loan amount.
  8. Does the borrower have experience managing property apartment properties?  Most lenders will require that a borrower has prior experience owning or managing real estate.

These are some of the questions that a lender will ask when reviewing an apartment building loan application.

Another tip to getting the best rate and best terms is to consult a licensed and qualified commercial mortgage broker.  A competent commercial mortgage broker who deals with many different types of lenders has an advantage over going to a local bank. Apartment mortgage brokers represent not only local banks, but agency lenders, national commercial banks, insurance companies, Wall Street CMBS lenders, credit unions, and private lenders. A wide choice of lenders will increase the likelihood of obtaining the best rates and terms available in the market.

If you have a question about refinancing an apartment building or anything related to apartment mortgage lending, please don’t hesitate to contact me at 1-877-548-9454.