Amazing Surge Of Multi-family Property Sales
I am beginning to think that Dave Lindahl (from my recorded teleseminar) is correct about most investors selling at the wrong time for apartment buildings. There has been a surge of apartment building owners wanted to sell there property. This is not including the bankrupt and foreclosed property. I believe this is due to rising interest rates, and mortgage paper having to raise their interest rates on these rate, to keep up with the FED.
From what my memory serves me, the FED may raise interest rates again this Tuesday. Also, for all apartment buildings that are for sale that are selling at really low cap rates. Could it be that cap rates are going to raise up in the sellers market phase 1, which is not yet to happen due to the possible or present economic recession. And something else that is interesting to me is that most of these owners bought property back in 2000-2006.
Note: With apartment buildings the interest due on the loan is due on the last day of the month, and payable usually around the first day of the month.
The problem with most of the deals that I have looked is that they made very little sense. To be realistic and truthful, from my experience in the lending industry, most lenders want to see that the cap rate you are purchasing a property is at least 1-2% higher than your mortgage interest rate.
Any ideas or opinions?
I just bought my first multi-family (8-unit) at a discount and the reasons the buyer had to sell may be the same reason why you see a surge of apartments on the market now.
Most if not all commercial loans have a 3-, 5- or 7 year call on them where they have to be refinanced. Of course a couple of years ago money was flowing out of every lender and lenders were going to 90% on 1st loans.
Now it is refinance time - values have stayed flat and some of these owners are having a hard time refinancing as lenders in a pannick have lowered their LTV ratios and they think owners are over extended.
Of course the property we bought was an over extended owner heading to foreclosure. We paid off the previous owners 2nd mortgage at 20-cents on the dollar and the 1st took a discount also.
They did have the property listed but it was at a very low Cap rate that you mentioned before. I can only say make offers that make sense for you. You would be amazed at where cap rates can end up. Our cap rate almost doubled from what they had the property listed at to what we actually paid for it.
Good Luck.[ Edited by dnvrkid on Date 06/14/2008 ]
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ITB investor, does that stand for Inside the Beltline, as in Raleigh? Yes it does. Ironically, I am not doing much ITB investing lately...