If you own a small multifamily property—now, more than ever—it’s good to be you. For the better part of a decade, the market has delivered low vacancies and higher rents.
Apartment values have risen over 143 percent since 2009. As employment and wages continue to rise, 2017 is expected to be yet another strong year.
Bottom line: It’s a great time to cash-in on market improvements by refinancing— especially if your loan was originated in more difficult economic times. Growth is good and rates are still near historic lows. But, without the right preparation, you could find yourself short-changed.
5 Guidelines to Increase Your Bottom Line
- Go for Accuracy. Incomplete or poorly kept records make underwriting tough. You should have at least 3 years of precise operating financial statements and rent rolls. Identify any capital improvements. This not only makes underwriting go smoother it much more professional and makes a great impression on lenders/creditors
- Show Your Property Some Love With Upgrades. Well-maintained properties shows owner commitment. Serious or long standing deferred maintenance could require you to escrow part of your proceeds to cover repairs, reducing cash at closing. Lenders want good properties with growth potential.
- Strive for Stability. Volatile expenses, income, or occupancy makes it hard for your lender to project income when underwriting. Strive for consistent operations. Have a spike in expenses or a dip in occupancy? Explain it. Knowledge is power…when you address issues up front lenders/creditors look more favorably on the situation.
- Take A Second Look At B- or C-class Properties. While some lenders might shy away from cash-outs on properties with lower-than-market rents, Freddie Mac Multifamily does not as long as the property meets the underwriting criteria. Besides, Baby Boomers, Millennials and to some extent Generation X’rs generally gravitate to these property types.
- Take a Fresh Look. Already have a go-to source for financing? Options have changed. You owe it to your business to take a fresh look, especially if you have owned your property for at least three years and it has experienced rent growth, or you have made improvements to boost rent potential. You should be able to compare your options and make an informed selection
Let The Network put multiple free rate and term quotes in front of you so that you know what is available in your area.