Life Companies up their Apartment Building Investment lending, competing with Fannie/Freddie on rates, quicker rate locks and easier terms

Life companies are increasing their lending on apartment building investments says MFE Magazine.

Apartment Building Investment Loans

Life insurance companies upped the ante last year, processing apartment building investment loans hand over fist. And this year, most have increased their appetite and are charging through the first quarter at full speed, giving the government-sponsored enterprises (GSEs) a run for their money.

Most life companies today have the ability to be competitive with, and sometimes price inside of, the GSEs. This is particularly true for lower-leverage deals—and the most desirable assets.

But it’s not just attractive pricing—life companies also offer Continue reading Life Companies up their Apartment Building Investment lending, competing with Fannie/Freddie on rates, quicker rate locks and easier terms

Can you avoid these apartment building investment due diligence nightmares?

Apartment Building Investing Requires Diligent Due Diligence

Nowhere is getting your ducks in a row more important than in apartment building investing. See this quick MFE Mag article for tips from seasoned pros: Diligence Gut Check

The article covers topics like these:

How’s the Weather Out There?

The Case of Misplaced Ownership

Over the Income Threshold

Just an Accounting Mishap

What do these Niche Multifamily Teams know about battling the big guys (and winning) with Apartment Building Investment?

Great MFE article on apartment building investment niche strategies from teams who battle the big guys and win. Five different teams and strategies are profiled and they all have something to teach but I wanted to highlight one company whose strategy is very similar to ours. Here’s my exec sum in bluue:

LumaCorps Apartment Building Investment Strategy

LumaCorp. quietly owns and operates a 4,800-unit portfolio of 1980s, Class B properties managed to meet the needs of working-class renters.

These [renters] historically can’t buy a house, but they still want clean, quality, safe housing. We think it’s a much bigger slice of the market than other renter demographics.

Rent growth can be modest, but that’s OK. One of the advantages of owning property in small tertiary markets is that they are less active [in terms of new construction and competition, the rent growth is more predictable. LumaCorps Apartment Building Investment Strategy

LumaCorp. begins with old-fashioned real estate research, looking for distressed or underperforming working-class properties with potential. “We make money by fixing problems.”

But the firm isn’t interested in just any Class B property with deferred maintenance and an attractive price.

We’re very picky about the properties we acquire

We know our market very well, and we know what works in terms of floor plans, unit mix, and architectural designs.

We pick a property with good bones, and then we invest the money to bring it up to our standards.

LumaCorp. runs some of the tighter costs, yet when you drive up to the property, it always looks terrific. Some multifamily firms spend lots of money, and their properties still look tired.

Only a few properties will make the cut for the LumaCorp. treatment. “We might look at 100 packages. Out of that, we’ll find 20 worth looking at, and 10 will get offers. One might get done,” says Kelly, who made “a couple dozen offers” in 2011 and got one—Bardin Oaks in Arlington, Texas.

See the whole MFE Mag article here: Niche Guys Win

Pathfinder Buys REO Multifamily Complex Near Seattle for $5.1M Via MHN Online. 78 units @ $65.4k+/unit

San Diego-based Pathfinder Partners LLC makes Apartment Building Investment in Seattle area.

San Diego-based Pathfinder Partners LLC has acquired the View at Redondo, a 78-unit apartment property in Federal Way, south of Seattle. The apartment complex, built on a …. [Cut to the chase]

Key Concept:

“We believe there are opportunities throughout the major markets in the western United States to invest capital in high-quality projects with distressed or fatigued ownership that will result in significant returns,” Lorne Polger, senior managing director of Pathfinder Partners, tells MHN. “To that end, Pathfinder focuses on smaller apartment building investment, sized below the radar of the largest institutional buyers.”

The company’s strategy, Polger adds, is to buy the loan on a small property that needs finishing, has a large vacancy, or is beset by other issues. “These are typically transactions that need to be concluded very quickly, on an all-cash basis,” he says. “We have a track record of closing this type of deal in 15 to 20 days, and frequently get the call when a financial institution is seeking to conclude a challenging deal quickly.”

A very good strategy indeed.

Where is Your Multifamily Market In The Cycle? Nice interactive map. Via @UrbanLandInst

Is Apartment Building Investment in the up cycle in your market? Job growth is the most important leading indicator of the market cycle. Check out the cool interactive map through Q4 2011 from The Atlantic here: MetroMonitor Economic Performance Maps

Increasing Sources of Multifamily Rehab Funding Spur Value-add Projects.

3-4% 10yr bridge money for apartment building investment and rehab “coming out of the woodwork”. See the whole article here: Capital Streams Grow for Rehab

Seattle Multifamily Vacancy at 4.2% Says Dupre + Scott, average rents over $1,500 too.

For more on the Seattle area apartment building investment climate see the Seattle Times article here: Apartment rents likely to keep rising through 2012

Hat tip: Paul McFadden

What drives changes in operating expenses (OPEX) for CRE and Multifamily? Nice research from CBRE Econometric Advisors

As every landlord knows, operating expenses (OPEX) are an important element of commercial real estate investment performance. In spite of the important role OPEX plays in investment performance, there is very little research that analyzes the structure of these costs or identifies what drives the differences in these costs across markets. This article aims to share the latest findings on the drivers and structure of OPEX.

… That industrial variable costs have a lower elasticity than those of the other property types accords with what investors in this asset class generally experience: that these properties are usually cheaper to operate. A perhaps more surprising finding is that the elasticity coefficients for office, multifamily, and retail—property types with significantly different operating structures—are fairly similar to one another. We are conducting further research to better understand this finding.

See the whole piece here: What Drives Operating Costs in Commercial Real Estate?

Getting Inside the Head of Today’s Online Renter, multifamily report now available.

From my friend Heather over at Behind The Leasing Desk Consulting: “fact: I ♥ Satisfacts! Check out their new report on the mind of the online renter for some great insight into what your potential residents are thinking.”

From Satisfacts: “We asked, and now it’s ready for YOU. Getting Inside the Head of Today’s Online Renter is the most comprehensive analysis ever conducted in the industry on the impact of technology and social media on apartment marketing and operations.” Get the report here

Category: Multifamily Investments