With the ever-expanding federal moratorium on evictions, the multi-family has had its share of problems during the pandemic, even though the category has arrive with minimal changes. Not all multi-family loans are good positioned for refinancing and selling, but aggressive lending options are available to many borrowers, according to Joseph Landsberg, director of capital advice, South Florida, for Franklin Street.
“With the multi-family, we had seen restrictions on lending to value,” Landsberg told GlobeSt.com, with Freddie Mac and Fannie Mae looking for up to 12 months of reserve during the pandemic. “In the last few weeks, they have relaxed this guideline, which means if your loan-to-value ratio is between 60% and 65%, they will give up the reserve for low-leverage transactions.”
Clearly, concerns are starting to ease as competition among lenders begins to intensify. “In general, we look for rates in the low range of 3%,” says Landsberg. “If you look at the whole loan spectrum, the multi-family loan is the most aggressive loan. I just had a regional lender who cut their rates by 10 basis points. For the first time I can remember, we are seeing rates in the high 2s for qualified multi-family loans in Broward and Palm Beach, Florida. It is a real relaxation.
Landsberg says Franklin Street is experiencing aggressive loan rates in other parts of the country, such as California, New York, Georgia and Texas. He sees a postman operating in two ways, depending on the location.
“One is that there are a huge number of people moving into [some] states and lenders want to be a funnel, ”says Landsberg. There is a great opportunity and lenders who can capture enough of the business may make a little less per loan but could more than make up in volume. Then there are the states which are the starting points for so many people. “Banks are trying to get customers to go to other states.” In this case, the choice is not to make profit in volume, but to try to avoid losing a lot of profit due to a large drop in volume.
But how long will it last? Part of the answer has to do with the pandemic stimulus. “Because [the government] billions injected [into markets], the effect is large and it takes time to rebalance, ”says Landsberg. If inflation rises for a few years, it could cause the Fed to raise interest rates, making the lending scene more expensive. “It’s my prediction that as long as the economy and jobs are good, we’ll be on this very fine tipping point.” Follow the line and conditions could be favorable for a while, possibly until the fourth quarter of 2024.
In the meantime, Landsberg says borrowers can become more competitive. Nine out of ten investments are longer term – eight to ten years – and he says they should take advantage of rates now, especially if the loan can be assumed.
“The majority of buyers buy with debt,” says Landsberg. “You’re going to get a much higher cash-to-cash rating. “
Relationships with banks provide the best rates, adds Landsberg. And that you judge on the results. The lender of a few years ago may not be the best now. “If you have such a good relationship with this bank, it will offer you much better terms,” he says. “It’s not as strong as it could be.” So, either directly or with some help, see if there is a better rate to be had.