Jul 30, 2019
The largest source of capital for real estate comes from the
debt lender, but investors tend to spend little time speaking with
lenders to understand their requirements. On this episode, we speak
with Scott Williams of Aline Capital on how to qualify for
commercial loans. He shares great tips for syndicators and shares
why the interest rate is not the most important metric you should
evaluate.
Partner: Join Our Exclusive List and Get a Free Sample Apartment
Deal Package
Key Market Insights
- Provides both equity and debt financing
- Equity: returns fluctuate with the property; Debt returns are
fixed
- Institutional equity is deal based but the operator must have
experience
- Grew up in commercial real estate, father was a commercial
appraiser
- Received a real estate degree out of Clemson
- Worked as an outsourced underwriter for Fannie Mae, Freddie
Mac, and CMBS
- Common mistake operators make is seeking the lowest interest
rate
- The #1 thing to make or break returns on a deal are pre-payment
fees
- Yield maintenance: typically on CMBS
- Step-down, open pre-pays
- Operators seeking maximum IO (interest only)
- Maximum IO comes with longer loan terms, even on a step-down,
you will have a higher pre-payment in the early years
- Markets shift, watch prepayment for flexibility
- Assumable loans help, but you want to ask if a second loan is
acceptable
- Fannie Mae loans are assumable, supplemental loans are
permitted
- Get comfortable with the stress metrics
- What has to happen for this deal to fail? How likely is this
scenario?
- Pay attention to real estate taxes – in South Carolina, it is a
point of sale state where the property is re-assessed at the point
of sale
- You do not need to disclose to the lender that you are
syndicating the deal
- Lenders want to know that borrowers have skin in the game
- To get a non-recourse loan: net worth equal to the loan,
liquidity and post-close liquidity (9 -12 months of debt service to
10% of loan proceeds)
- Having a partner with liquidity is the #1 reason syndicators
add partners
Partner: Check out the
Passive Income through Multifamily Real Estate podcast with
Kyle and Lalita Mitchell
Bull’s Eye Tips:
Winning the Best Commercial Loan: Work with someone before you
find the property
Tracking Market Changes: Constantly evaluating interest rates
and programs
Daily Habit: Only have 3 priorities per day
Resources:
Best Business Books:
Traction by Gino Wickman
Digital Resources
Podcasts
Tweet This:
“Common mistake operators make is seeking the lowest interest
rate”
“The #1 thing to make or break returns on a deal are pre-payment
fees”
“You do not need to disclose to the lender that you are syndicating
the deal”
Places to Grab a Bite:
The
Anchorage – Greenville
Connect with Scott:
Website: Alinecapital.com
Phone: 864-729-3990
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sure to check out more info at TargetMarketInsights.com.