I bought your Dealmakers Guide back in 2005 or so. It was a good, informational, no-nonsense read. My partner and I have applied some of what we learned to develop a 22 unit student rental portfolio in Philadelphia. We are currently 100% occupied and are in prime leasing season for the Fall 2012-2013 school year and are already about 95% leased up.
All are new construction within the past 3 years. All are on the same block (except one) with title held in 3 entities (long story). Total debt $3.1M with mkt value at $4.5M. Each building has its own commercial mortgage from a smaller local bank. Usually 5 year balloon with 20 year amortization. We have a full time property manager run this and other things for us and do not plan on selling.
Question - does it make sense to get a blanket mortgage on all buildings to get a better rate and lock it in for a longer period of time? We have a mortgage person looking at the deal now but I have doubts about his ability to get the job done.
Im not Ray, but I like the idea of doing the properties in each entity in a seperate blanket loan.
That way when you get to a point where youre no longer seeking growth in the portfolio you can apply extra cashflow to pay off the smallest loan and enjoy a boost in cashflow. Whereas with only 1 loan you would have to do a rate and term refi to see the same drop in your constant payment rate.
Thanks for the kind words about the book. Glad to hear it’s been a help and hope you’ll keep in touch. I’ve got a new edition in the works along with some add-on manuals to support the practice modules.
With the info given on your project I would look at consolidating the entities and the loans. It’s new construction, recently stabilized, and a favored sector (i.e. mutli-family; student housing). The consolidated loan amount of $3mm+ it will qualify for 25 to 30 year amortization through GSE’s and life company loan programs.
Consolidating the entities (assuming no problems with partnership interests that may be an impediment to merging entities) will make the ownership portion of the underwriting simpler, as well as eliminate or limit personal guaranties.
Thanks for the response. Do you have any contacts in the Philadelphia area who we might talk to to help us with finding financing? We have been using small commercial banks for each building and don’t have any contacts with brokers for GSE or Life compan loan programs.
Thanks again. I’ll look for your updates for the Guide.
I have a good friend in Harrisburg PA who owns a mortgage brokerage firm, and also a real estate investor himself. In my experience this is a hard combination to find, and hard to beat when you find it.