While rapidly rising real estate values in single-family homes have changed the calculation of profitability for fix-and-flip investors for single-family homes, the equity picture for multi-family homes is very different. Multi-family investment fell to its lowest level in seven years in 2020, with certain high-density markets particularly hard hit, according to CBRE. This means that seasoned investors have the option to purchase distressed apartment buildings at a discount and convert them into profit factories in a post-pandemic market. All you need is the right broker and the right loan.
Michael Boggiano (pictured) believes he has such a loan. LendingOne’s director of multi-family origins told MPA that his company’s multi-family bridge loans are specifically designed for “transitional” apartment buildings that need to be renovated and refurbished to become truly valuable again. These are often properties with unstable financial and occupancy figures, so that a short-term correction is required.
“The borrowers are using these loans on a property that is not eligible for permanent financing,” said Boggiano. “Most bridging loans finance part of the property, the cost of the renovation and an interest reserve to cover debt service payments over the life of the loan. After stabilization is achieved, borrowers can either apply for permanent financing or sell the property. “
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Boggiano noted that these loans can also help finalize a time-sensitive purchase transaction for a more stable property, with borrowers seeking permanent funding immediately afterwards.
The ideal borrower, Boggiano explained, is a seasoned investor looking for great opportunity in a subpar asset that just needs to be smartly renovated. Brokers should speak to their investors about these loans when they see such an opportunity that can be maxed out in 12 to 36 months.
Boggiano presented the LendingOne product set. They offer loans between $ 1 million and $ 20 million with maturities of 12 to 36 months with LTVs of up to 75% and LTCs of up to 80%. All loans are valued at competitive fixed rates, without recourse and completed within 30 days. This is a quick means of moving the investor to a historically low permanent funding rate.
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When investor clients look for the next big distressed asset opportunity, smart brokers can begin looking into multi-family bridging loan solutions. Having the right loan partner is key, however, and Boggiano believes that he and his team at LendingOne provide the service and expertise an investor needs and the financial partnership a broker relies on.
“LendingOne is a proven multi-family bridge lender with industry experience,” said Boggiano. “As an unaffiliated bridge lender, the broker can choose the refinancing option including selling the property that best suits their client without incurring a redemption fee. Bridge lenders that are either affiliated with another lender or have their own permanent loan programs charge a redemption fee of up to three points if the borrower decides not to refinance with the current bridge lender. “