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Rates For Apartment Building Loans About Where They Were A Year Ago Just Before…

The apartment loan rate we track popped up into the 4.70s today after spending the last three weeks in the 4.60s. Today’s 4.71% rate is about the same as it was a year ago, just before the taper tantrum hit. Monday quotes on the 10 year Treasury have climbed two weeks in a row now but remain below most recent highs of March, clocking in at 2.62 today. The downward march of the spread has flattened recently in the 2.0 – 2.15 range, including today’s number at 2.14. The ULI <60%LTV rate still looks like someone bouncing a ball down the stairs but their data is lagged a week so we’ll have to check back on Friday to see if that rate is going to tick up as well.

10 year Treasury versus Apartment Building Investment Loan Rete June 2014 — Click on image for full size

Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Rates For Apartment Building Loans About Where They Were A Year Ago Just Before…

Apartment Building Investment Loan Rate Trends Lower as 10yr Treasury and Spread Fall.

The apartment building investment loan rate we track continued to trend downward as both the 10yr Treasury (T10) and the spread between the two came in during April. Today’s new rate on the loan is 4.733%, a 212 basis point spread over the T10 which was in the 2.61% area today. The six month moving average spread continues to fall suggesting that lenders are more confident and/or aggressive but the spread itself is above the March 17 low of 209bp.

This month we add a new rate which the ULI (Urban Land Institute) reports on from the Trepp survey. According to the ULI the Trepp rate is what large institutional borrowers could expect to pay on a 10 year fixed rate, less than 60% LTV loan for a “crème de la crème” core apartment property located in a gateway market. We track this rate as a barometer of what the largest lenders are offering their best customers on the most secure loans for any advanced warning about future rate and spread changes. See the ULI<60LTV Rate on the chart below (in gold). Note that the spread we chart is between 10yr loan we track (in orange) and the T10 (in blue):

Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Apartment Building Investment Loan Rate Trends Lower as 10yr Treasury and Spread Fall.

The 3 Most Important Things You Need To Get an Apartment Building Investment Loan

ALB Commercial Capital has a nice guide for small balance (<$5 million) apartment building investment loans. In it they cover the three most important ratios investors have to clear in order to get a deal funded:

Loan-To-Value Ratio (LTV) = Total loan balances (1st mtg + 2nd mtg) / Fair market value (as determined by appraisal). For Multifamily mortgages, LTVs seldom exceed 80%.
Debt Service Coverage Ratio (DSCR, aka DCR, DSR) = Net Operating Income / Debt Service. Most lenders insist that this ratio exceed 1.2 with a few a allowing 1.15.
Personal Debt Coverage Ratio (PDCR) = Monthly Personal Debt / Monthly Personal Income. The Personal Debt Ratio compares the amount of bills that the borrower must pay each month to the amount of income they earn. Personal Debt Ratios seldom are allowed to exceed 50% in practice.

In addition the guide covers other items that need to be addressed such as Continue reading The 3 Most Important Things You Need To Get an Apartment Building Investment Loan

Local banks, S&Ls and Credit Unions lining up for small apartment building investment loans.

Local and regional banks are working hard to fund ‘small’ apartment building investments in their local markets. Small loans in the $1-3 million dollar range are the ‘sweet spot’ for these lenders and investors looking for loans in the $3-5 million range are finding even more choices. For loans under $1 million the market is still pretty fragmented with lenders there averaging only five loans of that size.

“Banks are trying to create more aggressive lending programs in the small-balance multifamily financing space.”

In the West, banks like Sterling, KeyBank and Bank of The West are Continue reading Local banks, S&Ls and Credit Unions lining up for small apartment building investment loans.