It’s a new year and change is in the air. With financial regulation changes sure to come and the recently announced Federal interest rate increases, it’s no wonder mortgage banking and real estate lending is hot on investors’ minds.
Listeners will remember Livingston from episode 70, in which he gave us a recap on multifamily mortgage banking and real estate lending from the 2016 conference. Livingston is Vice President of Walker & Dunlop‘s Tampa office. Livingston brings over 12 years of experience in real estate lending and finance solutions to Walker & Dunlop, which just celebrated it’s 80th anniversary.
Livingston offers up a recap of the 2017 CREF/Multifamily MBA Conference and discusses key themes from the past year and the current state of mortgage banking and real estate lending.
What’s In Store for Mortgage Banking and Lending
Agency Annual Caps
Fannie Mae & Freddie Mac each allocated $36.5 billion for 2017 (same as 2016)
Certain loans and portions of loans are excluded from the cap (i.e. affordable and green/energy efficient)
Fannie Mae & Freddie Mac multifamily production totaled over $110 billion in 2016.
Fannie up 30%, Freddie up 20% from 2015
Expected to capture 40% of total multifamily volume for 2017 ($50-55 billion each)
Risk-retention regulations put in place in 2016, narrowing amount of CMBS lenders
Post-election stability, but more selective lending market
CMBS lenders ramping up bridge-lending
Life-insurance (50% leverage and under): 125-135 range
CMBS (75% leverage): 250-280 range
Agency (80% leverage): Low 200s range
Federal interest rate sees .25% increase
Expected to increase to 2.75-3% by end of year
Publix most active retail buyer in FL
Grocery chains are buying out plazas after lease terms or taking right of first refusal on new lease terms
Reduced supply of grocery-anchored retail
Strong retail appetite for real estate lenders
In addition to his V.P. role at Walker & Dunlop, Livingston is President of the Society of Real Estate Professionals (SOREP). Formerly the Tampa chapter of University of Florida’s Bergstrom Council, SOREP hosts networking events and seminars to professionals and gives back to Florida universities. SOREP focuses on all aspects of the real estate industry and is open to all. Click here for more info.
Walker & Dunlop offers comprehensive real estate financial solutions for all income-producing properties. For more info, visit Walker & Dunlop website.
Election years always have the potential to inject uncertainty into investment and securities markets… this year has been particularly interesting and it should be fair to say that the result of this election ties an enormous “?” to the end of 2016. Market uncertainty has been reflected in recent rate rises for investor mortgages.
Elysia Stobbe, NMLS# 146751 is not deterred by uncertainty. Elysia is not only a mortgage expert with NFM Lending, but with over 30 properties in her personal portfolio, she is also an experienced investor. She has shared her expert advice on numerous radio and television broadcasts and has authored a book on getting the best investor mortgages. She has been following changes to investor mortgages closely and is finding flexibility and continued promise for real estate investing.
3 Changes to Investor Mortgages
.5% hike in mortgage rates driven 10 year treasury bonds post-election
e.g. $300k loan sees monthly increase of $90
Fannie Mae (FNMA) loan-to-value down-payment requirement 25% up from 20%
Multi-property SFR (up to 4 units) investors can hold up to 10 mortgages if purpose is to purchase investment properties
Cash-out options have been increased for investment properties
Shows improved confidence in property equities
Return of bank statement programs to bank portfolio loans
Recent rise of investor rehab loans
Investors can save cash while making properties rent-ready
While they may not be offer as much community banks generally offer better terms than national banks
Alt. options: seller-financing; hard-money
Contacts & Resources
Call NFM Lending for more info on investor mortgages toll-free 888-574-7770
How to Get Approved for the Best Mortgage Without Sticking a Fork In Your Eye
Normally, our episodes focus on making strong, equitable real estate investments but as investors feel the restraints of a tightening lending market, they are looking for alternative financing options. Mortgage notes represent a secure and a stable income market. Buying and selling mortgage papers can yield sizable returns that can supplement an investor’s income-base.
David Campbell is a jack-of-all-trades in real estate investing. He is an experienced real estate investor and developer, he handles property management, and he buys and sells mortgage notes and offers private financing options. David, who made the transition from high school band director to real estate investor in 2001, began buying and selling mortgage papers in 2012 and has manged an increasingly profitable debt portfolio since. This episode, David discusses his multi-transitional career in real estate and how buying mortgage notes can be a great way to invest in real estate.
Market demands alternative financing options
Private lenders + Seller financing
Self-Directed IRAs – about 60% of alt. lending market
Used for non tax-efficient assets like mortgage notes
A significant mortgage/debt portfolio can be stable and lucrative income-base
Happy to make $ on deal by end term?
Deal still profitable w/ out loan payment?
Predatory loan claims risks?
Mortgage notes and Dodd-Frank
Work with Registered Loan Mortgage Originator – creates ‘Qualified Mortgage’ papers
Loan can be guaranteed against inconsistencies with Dodd-Frank regulations
Ensure notes are good before buying
Borrowers – debt-to income ratio 45% or lower; no higher than 6.5% above average prime offer rate; 15 + 30 year terms (9.5% rates)
David’s website www.hasslefreecashflowinvesting.com is loaded with materials and resources for real estate investing, development and financing. Visitors can find out more about David’s enterprises as well as check out his blog for even more information! For other inquiries, David can be reached directly by email: email@example.com
“Inventar”: last episode, we were introduced to this phrase by our guests, Josue Romero and Juan Nunez. The hardships faced in Cuba as young men and as immigrants to Florida instilled in them an invaluable determination to thrive and to make the best out of any situation given – to invent success out of nothing through hard work. This episode, we learn how Juan and Josue applied these principles to Florida real estate as we trace their success stories from their introduction into the real estate industry to where they are today.
Josue was introduced to the financial side of real estate in 2009, at the peak of the financial crisis that crippled Florida’s real estate markets. We learn how he was able to find success as a mortgage broker despite the dire state of real estate financing. Juan, with Josue as his mentor, entered the investment side in 2011 and quickly found success in the single-family residential markets fixing and flipping. Together, Juan and Josue formed a dynamic, cooperative relationship founded on principles of hard work and perseverance and are now leaders in Florida’s single-family markets. Josue is the owner of MyLendingHub.com, a mortgage calculator website and Juan is owner of Zenun Enterprises, a real estate investment firm. This episode, they discuss their approach to lending and investing as well as the current state of Floridaand Hillsborough’s real estate markets.
Focused on Single-Family Markets
Majority fix-and-flip deals
Emerging in development and construction
Hot Hillsborough SFR Markets
Town ‘n’ Country
Appreciations not really a problem for next couple years, but investor pool diminishing
Lending markets moving from FHA to conventional institutions (Fannie Mae, Freddie Mac)
3% down for qualified investors and lower premiums than FHA
Tips for Investors
Focus on single market and expand only after well-established
Large portfolios are difficult to manage alone
Have a team; network with agents and brokers
Due diligence is key
Stay in budget
For lending inquiries or solutions, contact Josue by phone – (813) 802-6970 or visit www.mylendinghub.com
For any investment inquiries or potential investment opportunities, contact Juan by phone – (813) 766-2959
The coming year is looking to be an eventful period for mortgages and financial lending in real estate. Debt markets are poised to undergo significant changes over the following years amidst regulatory changes and geo-political headwinds. Investors, both seasoned and novice, should be aware of the changes and the effects they could have on current and future mortgages.
Livingston Hessam, Vice President of financial solutions firm Walker & Dunlop and financing expert, discusses these changes in the debt markets and what investors need to know about their impacts on mortgages and other debt-equity options.
2016 Mortgage Bankers Association Conference
Annual conference gauges financing market for coming year
Brad Hubbard is an expert in all things related to flood insurance coverage and requirements. As founder of National Flood Experts, Brad has been saving investors thousands of dollars in expenditures by eliminating annual flood insurance costs. Brad discusses what he looks for in a property to determine its status in relation to FEMA’s national flood-zone map. He also discusses what investors and property owners can do to reduce flood insurance costs on properties not eligible for exemption. This is a great method for investors to eliminate a long-standing line-item on a property’s financial portfolio and increase the property’s long-term investment value.
Individual properties may be built outside of federal flood-zone parameters
Compare construction of building with FEMA flood-guidelines
Due Diligence on property
Elevation Certification – verifies building’s base flood-line in a 100-year period.
Other info on elevation and structure of building
To contact Brad with questions regarding flood insurance or for an eligibility inspection, call the National Flood Experts at: 1-800-561-0396 or email: firstname.lastname@example.org
Winter is coming… And so are national interest rate increases.
The Federal Reserve has recently announced a new national interest rate hike, the first since 2006. Real estate investors are very anxious about the announced rate hike. Many investors are wary that the rate hike may be instituted prematurely in an economy that is not capable of facilitating the effects on real estate markets.
Mark Fleming, Ph. D. serves as the Chief Economist for First American Financial Corporation. With over 20 years’ experience in mortgage and property information, Mark analyzes and forecasts national mortgage and real estate markets. This episode, Mark lends his expertise to our discussion on the new rate hike‘s effect on current real estate markets at a national level, and tells us why investors shouldn’t be so worried.
Federal Reserve Rate Hikes
First rate hike in 9 yrs
2006 – +5% increase
2007 -’08 to Present – 0%
End of Year (2015) – .25% increase
2016 – +1% increase
Instituted to correlate with expected income/wage growth
Long-term, fixed-rate loans not affected
Good for housing markets
House-price appreciation seeing “asset inflation”, especially in Florida
5-6% nationally, higher in FL markets (South Florida)
Out-pacing current wage growth, causing increase in housing rates
Rate hike should slow appreciation growth rate
2016 and Beyond
Rate hike est. 5% increase
House-appreciation (Nationally) projected to slow to 3-4%
Income growth est. 3-4% increase
Commercial real estate to benefit from economic growth
Multi-family to benefit from strong millennial rental market
When it comes to multifamily investing, the size of the deals is often the most intimidating, but as we know, with bigger risks come bigger rewards.There is always a reason not to do something. The transition to becoming a multifamily investor may seem overwhelming but many investors make the move into multifamily markets and overcome the obstacles to become successful multifamily investors.
Karma Senge is a multifamily investor with quite an interesting story. Like most real estate investors, Karma cut his teeth in investing in the single-family markets. After entering the market in the early 2000s, Karma had soon acquired over 350 properties in his portfolio and was single-handedly managing them all. After a brief departure from real estate investing to recover from the stress of single-family investing, Karma reentered the market with a focus on multifamily investing. Despite his renewed vigor, Karma had to work his way back from the ground up in the multifamily market, eventually acquiring his first investment on a 6-property portfolio. Karma’s story is one of hard work and perseverance. Karma managed to overcome the obstacles ahead of him and establish himself as a successful multifamily investor in Florida and the Southeast U.S.
Seller-financing and creative debt options provide an appealing alternative to institutional debt options
Researching markets and properties is imperative before committting to any deal
Find a Mentor
Someone who is an experienced multifamily investor can serve as an invaluable source of information and guidance
Have a Team
A team of experienced staff or even a partner can help to manage responsibilities and stress
It is important to consider tenants when investing in multifamily. Invest in community-oriented projects and developments.
Joe Fairless bought his first single-family investment properties in his home state of Texas after leaving a successful, but unrewarding career in advertising. After finding that multi-family investing offered greater returns and less inventory, he began making the transition to multi-family investing.
His first deal was managed through unconventional measures. Lacking the standing as a seasoned multi-family investor, Joe incorporated non-traditional, creative equity solutions for obtaining capital for his first 168-unit apartment complex in Cincinnati, Ohio. Now founder of Fairless Investments, Joe controls millions of dollars in multi-family investment properties. Joe shares his experience in multi-family investing and provides tips for securing capital through creative equity methods.
Challenges for Single-Family Investors
Lack of credibility in multi-family markets
Traditional lending and private financing may be difficult to attain
Network Personal Contacts
This is a good practice for single-family investors to find financing by networking personal relationships for interest in multi-family investing
Network and affiliate with organizations that may not be lenders but have cash flow or may have eye towards investing
i.e. philanthropic organizations, community foundations, business groups
Establish Investment Base First
This does not mean a blind-fund or requirement of prior monetary investment
Form verbal contract with investors based on shared financial goals
Pursue investment opportunities that suit shared criteria
Structuring Deal With Investors
Preferred returns – investors get cash from deal before yourself
Make yourself attractive to lenders and investors
Know the market, know the deal
Investing is starting a small business; structure so that you may sell that business. Don’t get tied down to an investment
Joe has his own daily podcast in which he interviews guests on a variety of real estate investment strategies
Successful investing needs capital. For real estate investors, that often means mortgaging existing properties as a source of attaining capital. Traditional lending through banks and other financial institutions is often the method of acquiring hard-money loans. Sometimes though, the loan approval process may be too time-consuming or their lending practices may be too restrictive for investors.
Keyur Patel (top, left) and Naim Hamdar (top, right) of Synergistic Fundingshare three types of creative mortgages that are available to real estate investors as an alternative to traditional institutional lending.