As I mentioned in my previous videos, the bank is your partner in the multifamily deals you make. However, finding the right bank is just as important as finding the right partner.
While you may be crazy about multifamily cashflow, not all banks specialize in doing multifamily. Here’s an example: I am working on a $5 million dollar multifamily deal in Cleveland. The sellers were looking to get out of the deal because they wanted to move out of state. And taking a look at the loan, it had a good rate in the mid-fours, but had a 20-year amortization. I thought this was odd for a loan of this size. Since a loan was assumable, I figured I would give the bank a call then see if there’s an opportunity to take a loan over with a longer am. It would not only help the seller save a bunch of money in prepayment fees but also get the financing done a little quicker.
After talking to the bank and asking them about doing a 30-year amortization, the banker admitted that his underwriters really don’t like multifamily and the very best they would do is 25. This bank really loves Industrial and Warehouse type properties. The point is, you need to make sure that you speak with multiple banks to get the best rates and terms you can, but also make sure that the bank is a fan of multifamily. Again, your bank is your partner. They have to believe in the deal as much as you do.
By the way, the reason why I wanted a longer amortization is because I’m aiming for cash flow. While of course a shorter amortization would pay the loan off quicker, my partners and I are looking to leverage the property cash flow as much as possible. The longer the amortization is, the better the cash flow will be over all.
Hope this was helpful and I will talk to you guys again soon.