FINANCING NEWS FOR COMMERCIAL REAL ESTATE

SBA Financing - The Recovery Act provides $730 million to the SBA to make changes to the agency's lending and investment programs. The Act provides $375 million for the temporary elimination of fees on SBA-guaranteed loans and increased SBA guarantee percentages of up to 90 percent on certain loans. In addition the Treasury Department is committing up to $15 billion to help unlock the secondary mortgage markets. These changes will result in lower financing costs (more than 3% of the loan amount) and an increased supply of credit, as lenders enjoy increased credit protection and secondary market liquidity.

Commercial Mortgage Consulting Services - Commercial real estate owners and lenders are facing a complex set of circumstances that are creating stress in even the most conservatively underwritten real estate investment. The current economic conditions are challenging all areas of commercial real estate property management and lending compared to the peak years of 2006-2007. Robert T. Gibney & Associates has assembled a team of seasoned professionals to review, analyze, and restructure commercial real estate loans.
Your real estate clients may benefit from these services:
• Objective analysis of the subject property in relation to competing properties in the sub-market
• Develop strategies to reduce the risk of loan default for loans maturing in the next 3-5 years
• Assist in negotiating Loan Workouts and Modifications
Link for additional information
http://www.azcommercial.biz/pdf/RTG_Commercial_Mortgage_Consulting.pdf


Underwriting Update – New financing continues to be available from a select group of balance sheet lenders. These lenders use their own capital to fund loans. In addition they retain loans on their balance sheet for the entire loan term. In contrast to recent years, lenders are using a traditional approach to underwriting using the following criteria:
PROPERTY
• Actual Cash Flow – trailing 12-month data (Net Rent Collections, Operating Expenses, Vacancy Rate). Consideration is given to declining trends in net operating income.
• Debt Coverage Ratio – 1.25 to 1.5 debt coverage ratio
• Reserve for Debt Coverage – Reserve account held by lender to be used in the event that existing tenants default or fail to renew their leases
BORROWER
• Global Cash Flow – A detailed evaluation of the borrower’s cash flow for all real estate investments, businesses, and personal obligations
• Exposure to Short-Term Liabilities – Evaluation of the potential risk associated with the borrower’s need to payoff loans in the next 1-3 years
• Post-Closing Liquidity – The availability of cash and marketable securities is an important consideration for many lenders. Loans may include a covenant requiring the borrower to maintain a minimum amount of liquid assets during the term of the loan

IN THE NEWS
MULTIFAMILY - WSJ April 8, 2009 - The nation's apartment market deteriorated in the first quarter as rising unemployment dashed landlords' hopes that the housing downturn would create a soft landing by bringing former homeowners back as renters. The vacancy rate for the top 79 U.S. markets jumped to an average 7.2%, a full percentage point increase over the past two quarters and the highest level since the first quarter of 2004, according to statistics from Reis Inc., a New York real-estate-research firm. The jump in vacancies came even as landlords reduced rents. Asking rents, which exclude concessions and are often the starting point for rent negotiations, fell 0.6%, the largest fall since Reis began its count in 1999. Effective rents, or the rents that landlords actually collect, fell 1.1% in the first quarter to $984.
COMMERCIAL – WSJ April 8, 2009 - Commercial landlords continue to lose retail tenants at an accelerating pace, indicating that the industry's troubles are worsening. The amount of occupied space in U.S. shopping centers and malls declined a net 8.7 million square feet in the first quarter of 2009, according to real-estate-research company Reis Inc. The amount of occupied space lost in that one quarter was more than the total amount of space retailers gave back to landlords in all of 2008 and any other year in recent history, according to Reis.
All of this information was made available to me from
Robert T. Gibney & Associates
4300 N. Miller Road, Suite 212
Scottsdale, Arizona 85251
Phone (480) 429-3642 Mobile (602) 315-5671
Email rgibney@AzCommercial.Biz
www.AzCommercial.Biz
Mortgage Broker Lic. MB0904411


Maureen Karpinski
Find your Phoenix Arizona Property at Cactus Country Arizona Homes & Properties

Phoenix Real Estate - Are There Advantages to Multi Family Units?

If you are looking to invest in real estate in the Phoenix area, you may
want to consider putting your money into multiple family dwellings.
Considering the current downturn in the economy, it really makes
good sense to invest in this type of housing verses a single family
home. Here is some information that will help explain why this would
be a smart decision.

Creating wealth through real estate investing is something many
savvy business people do. What are the advantages of putting your
money into small residential income properties? Suppose out of 10
units, 2 are vacant. The monthly costs to the investor are much lower
than that of an empty single family home. Make sense?

Here is an example:

Let's say owner "A" invested in a single family home of average size
that normally rents for $1200 with a mortgage of $1000 per month.
This home is now empty, and for one months mortgage the owner is
out $1000. This comes out of his own pocket.

Now, owner "B" has a 6 unit multi family dwelling and each unit rents
for $700 per month. The monthly mortgage on this property to the
owner is $3000. Two units are vacant, which means he will receive
$2800. This only leaves the property owner $200 short of making his
mortgage payment. Now, think about the outcome to you, the
investor. Would you rather have $1000 or $200 coming out of your
own pocket for that months mortgage payments?

This is one of the benefits of investing your money in multiple family
dwellings. You can see why putting your money in a single family
home isn't such a good idea when you can spread the risk among
more units. This helps you to create a more efficient cash flow for
yourself and create future wealth. Can you see how investing in
several multiple dwellings could help secure your financial future?

Owners of multi family dwellings also have plenty of other advantages.
With repairs, for example, you can write off a portion of the cost in
many cases. When you own a single family unit, you get no
immediate tax benefits.

Investing in real estate is one of the best ways to insure that your
future is secure. Real estate and residential properties rarely ever
decrease in value, and tend to increase over the years. Of course,
investing in single family homes is a good decision, but diversify and
put some of your money into multiple family dwellings.

Of course, the negative aspects of owning a multi family dwelling will
come to mind, such as getting calls from tenants with repair and
maintenance problems. This does occur, but it really isn't as often as
you imagine.

The hard and fast facts are that multiple dwellings will insure that you
have a steady income stream that is as recession proof as any
investment you could possibly make. Your family's financial security
depends upon making smart investments, and this is one of the best!

Advantages of Investing in Multi Units

After reading this article and knowing the market place for these units.I decided to publish it. Real Estate in Phoenix Arizona is at the lowest in many years and the multi units are definitely at the lowest. Loans are difficult to obtain for them but they are still out there and with interest rates at their lowest in 37 years, you can afford to take a bit of a hit on the interest rate considering you are also buying at bargain prices.Multi units in Phoenix, Scottsdale, Glendale and surrounding areas are there for the picking.
Advantages Of Investing In Multi Units

By: Charles P.
Submitted: 08:46AM on Tuesday 13 January 2009
The author has permitted the reprinting and redistribution of this article.
See our Terms of Use for more information on reproducing it.
Usually the investors believe that buying single-home units will get them a good foothold in this particular field and they don’t have to invest a huge amount. This is outright a misconception. In a multi-unit investment, you can find more tenants and better cash flow compared to single units or homes. This, in turn, helps to pay off the mortgage on the buildings much faster. And the money which is contributed by the people for the maintenance work helps to take care of the maintenance in an easier way. As the payments made by the tenants every month come to a big amount it always gives you an opportunity to use the leftover money for reinvestment. Thus, it is better to create a strategy and contract a multi-unit property meant for many people. If you are able to increase the number of your multi-unit properties your level of income will rise and you can afford to hire the services of home management companies so your properties are well taken care of. Compared to buying individual family houses, buying multi-apartment houses seems to be more profitable from the point of view of retail, lease as well as wholesale.
There are further advantages of investing in multi-units, which will convince you better why investing in multi-units is one of the best options compared to investment in single units.
Higher cash inflow: When you invest in multi-units you are able to get an access to various streams of potential income instead of just one. Let’s take an example of a 60-unit apartment community or society where you have your occupancy on almost all the sixty units and you earn sixty times more than you could have earned from a single family home. Even if you have only 50 percent occupancy you would still make more than you would have done with single-unit investments.
Services from home management companies: Investing in multi-units will require recruiting someone to manage your property. There are a large number of home management companies that are always ready to respond to your request for maintenance and repair. They can prove to be helpful in getting new renters and can as well help you expel those who don’t pay rent. In this way you can save time and money as well.
Higher profit from selling: Those who invest in multi-units are usually on the lookout for potential buyers to make higher profits. You may not find buyers so easily but when you succeed in finding one you stand to earn a good amount of money. Even if the property gives you only a 10 % margin you will make more money compared to selling a smaller property.
Maintenance at a single location: When you invest in multi-units you have the advantage of maintaining your property at one location. This could prove to be really advantageous when you are to manage the property single-handedly. On the contrary, when you purchase ten single units at ten different locations you will have to do quite a bit of running around to look after each property. Naturally, it will be a pretty tiresome job. Moreover, by investing in multi-units, you will find all your tenants at one place. You don’t have to move frequently from here to there to answer all your tenants' requests.
So, if you are a smart real estate investor, invest in multi-units and make them part of your investment portfolio.

Multi Unit Loan Alternatives

In a difficult loan enviroment for investors buying and investors wanting to transfer ownership of a multi unit these days here are possibile alternatives. You can produce creative alternatives and stay in compliance with the lenders and all legal responsibiltes.


Loan Workouts / Modifications / Assumptions – It may be possible to structure sales based on a negotiated agreement with the existing lender. New financing may not be a viable option in the current market. The following points may be considered:

Negotiation with lender – In many cases, the borrower / property owner is not the best person to conduct negotiations with the lender. A qualified real estate broker, mortgage broker or attorney may be best suited to represent the borrower. I am available to work with you and your client to present the best case to support a loan workout or modification based on current market conditions.
Loan Assumption / Modification – A new buyer may agree to assume personal liability and to reduce the principal balance in return for a reduction in the interest rate, a short-term period of interest-only payments, or other loan modification as part of a property acquisition negotiation.
Seller Carryback – The current owner may structure a carryback (subordinate financing) as an incentive for the buyer to complete the transaction. A carryback reduces the cash equity required from a buyer to close a purchase transaction, while enabling the seller to create an income producing promissory note secured by a deed of trust

Happy New Year and a Very Prosperous One

It will be interesting, I'm sure when we look back a year from now and see where we went and how many turns we took getting there.

Lets all hope that we get the banks to loosen up some money for credible, eligible people to get loans. We are at a 37 year low for interest rates. That's a great way to start off 2009. All we need is the banks to give up the money so we can take advantage of these rates. First time homeowners have a wonderful opportunity here and Realtors have to be searching out that client base that went on the back burner November 1 when the ability to use down payment assistance went away along with the strict lending guidelines that stayed constant. I bet those lists are coming out of files and being checked twice. Low interest, low prices and still be able to get seller assistance on closing costs just not down payment could produce some very positive results. As we all know a little movement at the lower level and it all moves.
Happy New Year

Multi Family 101

Thinking of upgrading rental properties, perhaps moving from single-family homes to multi-family buildings? Have no fear. While managing these complexes, whether they have six apartments or 60, can sometimes feel more like running a business than managing a real estate investment, many of the tax, landlord and general real estate investing rules that apply to single-family housing also apply to multi-family investments.
Purchasing: Obviously, the overall cost of a multi-family building or apartment complex is much higher than a single unit. Small buildings with say, six units can range anywhere from several hundred thousand on up into the millions of dollars depending on the market, so you’ll probably need to have more cash available up front than if you’re buying a single-family home. The cost “per door” varies widely from market to market but is typically lower in larger properties, a result of various economies of scale.
An ideal building has a good mix of two-and three-bedroom apartments, the larger of which provides an opportunity to rent to families. Complexes with all one-bedroom or studio units tend to stay empty longer since they significantly narrow the pool of tenants they can attract. Of course, this all depends on the location of the property. A building near a college campus, for instance, might very well find plenty of tenants looking for one-bedroom apartments. In most scenarios, though, buildings with a good mix of unit sizes will outperform those packed with studios or one-bedrooms.
Location matters, so if you can, choose a property near the bus lines, local shopping centers, recreation facilities and other local attractions. Well located buildings command better sale prices and higher rents because they will be more desired and sought out by landlords and tenants alike.
Financing: Generally, a residential loan is all that is needed for buildings with one to four units, while a commercial loan is necessary for buildings with five or more units. Typical financing for one to four units will require 20 percent cash down, and loan fees vary, but usually average around 3.5 percent of the purchase price. In order to add larger properties to your portfolio you need to apply for a commercial loan, which has different underwriting and approval processes. For smaller residential loans, the banks generally look at the investment potential of the real estate and then fall back on the borrower’s personal financial and credit history. That’s not strictly the case with commercial loans where lenders are much more interested in profit and loss histories for the project itself. That can make convincing your bank to give you the money based on forward-looking projections more difficult. If possible, you should provide at least a three-year (five is optimum) historical report of income and expense data with your application package.
You may also run into trouble finding a bank that wants a commercial loan for less than $500,000. That means you’ll either have to think bigger and spend more upfront or shop around until you find a bank willing to finance smaller deals. Overall, lenders tend to look at all cash flow considerations including the amount of money you have in reserve to cover unforeseen expenses. They’ll also look at other costs you’ll incur besides the mortgage; these will include taxes, regular maintenance management fees and vacancy rates. Remember, banks need to see an ability to make repayments on a monthly basis in order to approve a loan. Many banks will have a set income to debt ratio, called debt service coverage ratio or DSCR that you will be required to maintain. A DSCR of 1.0 means for ever dollar of income there is a dollar of debt repayment. Expect most lending institutions to require a DSCR of at least 1.25 — one dollar and twenty five cents net income for each dollar of debt repayment — before they consider a loan viable.
Cash Flow: One big advantage of a multi-unit complex is that you will get payments from multiple tenants each month, making both vacancy rate hiccups and deadbeat tenants easier to absorb. If a single-family home is empty, vacancy is instantly 100 percent and cash flow plummets to zero. In a building with six units, if one or two of the apartments are empty there is still income flowing to help pay the bills. Compare that with a single-family house where just a few months without rent can quickly put a landlord in a cash flow crunch.
Because valuations of multi-family properties are tied more to cash flow and net income than single-family units, they tend to be less prone to wild speculative swings in value during both rising and falling markets. These values are often stated in the form of a “cap rate”, which is the ratio between the net income and capital cost. For example, a building purchased for $1 million that generates $100,000 in net operating income has a cap rate of 10 percent. When valuing properties, it is useful to think of the cap rate the same way you would look at a rate of return for any other investment. The higher the cap rate, the higher the rate of return on the investment, but also the higher the perceived risk. Cap rates vary depending on the location, size and history of the property. A fully tenanted apartment complex in a rapidly developing area will command a lower cap rate than an older building in a questionable part of town which is perceived to be a higher risk proposition.
Maintenance: This might be the first tangible difference many investors feel after the purchase process is completed. Even if purchasing and financing your first complex was easy, chances are you’ll soon feel pressure from the extra tenants you’ve taken on. Managing your first multi-unit project can feel like a full-time job. Real estate professionals will advise you to be prepared for the worst, and you should plan accordingly. Instead of that one perfect family you rented a house to with little fanfare, you’ll have several tenants with their leaky pipes, noisy neighbors and lost rent checks to deal with at any given time. Also, keep in mind that the same commonsense rental rules apply to apartments as homes. That means the more units you have, the more you will have to repaint, clean and inspect before a new tenant moves in.
However, if you currently manage several single-family units in different locations, buying a single larger complex could provide an advantage for you. Instead of six families living in six separate homes, your tenants will now share a single roof, lawn, and parking lot, leaving you only one area to maintain instead of six.
It may be advantageous to hire a property maintenance company to supervise, maintain and field calls for you. This will cut into your profit, but if you are a serious investor who wants to spend your time vetting new projects, it may well be to your advantage hiring someone else to take care of broken toilets and overgrown lawns on a day to day basis.
The Right Bet
Investing in apartment complexes should be considered a longer-term and possibly deeper commitment than owning and renting out single-family homes. It takes longer to sell a building or large complex than a home and it may take some time to get the hang of managing such a large property. However, if it’s done right, owning a multifamily complex can provide a constant source of income for years to come with considerable upside along the way. Any investment is a balance of risk, work and reward, but if you’re ready to take on a bigger challenge and move to the next level of investing, then a multifamily project might be the right bet.

Check out Maureen's multi family units at "http://www.cactuscountryproperty.com/multiunitandland.htm