HUD and the Census Bureau released the latest version of the Rental Housing Finance Survey. The “Survey fills an important gap in our understanding of who owns multifamily rental housing – mostly individuals, not large companies — and how multifamily rental housing is financed, especially as the structure of finance is changing. In light of recent changes in the availability of capital for rental housing, the Rental Housing Finance Survey also provides important insight about the financial health and stability of multifamily housing properties.” said Erika Poethig, HUD’s Deputy Assistant Secretary for Policy Development.
This is one table from the xls on the Census Bureau’s site here. Note the tabs on the bottom which have the data broken out by different types.
A few bullet points from HUD’s release linked at the top of the post:
There have been a number of reports recently claiming that renting is more expensive than buying a house. This is a great thing as everyone involved in selling, building and financing houses would tell you, especially if it were true. Unfortunately it is not for a variety of reasons, one of them being that owning the home you live in just isn’t that good of an investment, but we’ll get to that in a moment.
The first hurdle is the challenge of amassing the 20% down payment. On the average US home price of $242,300 the downpayment would be $48,460. That is essentially one whole year’s worth of the US median income of $51,413, so the question is how long would it take someone to save that much? This question is nearly always ignored in these comparisons. But say we all have a rich relative who leaves us the downpayment in their will, it’s all good after that right?
Some of these type of reports simply compare the average local rent to the mortgage payment for the area’s average home and therefore can be discounted out of hand. Others include taxes and insurance which is slightly better but they are still missing a very big piece of the cost of owning and operating a home; repairs and maintenance. Continue reading Rent Vs. Buy And The Great Myth of Homeownership as an ‘Investment’
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