“A lower interest rate doesn’t make a debt go away,” Dave Ramsey

Clearly, there are winners and losers in any circumstance, but as property owners and as a broker, financing is the life blood of the business. Without loans, very few could afford to buy existing or build new rental units and pretty much things would come to a halt. I refinanced a building a couple of years ago with a nice rate, but like with most multifamily buildings, the rates go to variable after a few more years. I know there are many looking to refinance now or in the near future and the mortgage payments on most buildings will increase substantially.

HAVE YOU PLANNED FOR YOUR NEXT REFINANCE? Since most multifamily loans are based on income and expenses, do you know your current numbers? Are you able to raise any rents? Even with rent control in California, have you checked to see how much you should be charging for your units? Have you looked into your expenses? You may have some things you could change to reduce expenses like providing separate meters for gas and electric. You can even do this with water meters. This will reduce your expenses, but it would be a rent increase for the tenants. Be sure and check the current regulations for your property location to make sure you send the correct notices.

YOUR LOAN AMOUNT. If your income and expenses are unchanged you may find your self in a position where the building will no longer “pencil out”. The loan you previously secured, even though it may have payed down some of the principal, may be larger

than the current loan would be. You may actually have to put in some cash to secure the same loan amount.

SMALLER BUILDINGS. If your own a building with no more than four units, you may already have a loan with a 30 year amortization. That is to say that the loan interest will be the same for 30 years, or the life of the loan. One to four units are considered residential, so they would not need to be refinanced. Buildings with 5 or more units, however, are considered commercial, so most will have a fixed mortgage for 5 years which goes to variable rate after the fifth year.

TIME TO DECIDE. If you have one of these loans coming due, it is a great idea to decide how you want to deal with this issue. You may need to raise rents or lower expenses. You may need to add money to pay off your current loan and get a new one with a lower amount. Or you may decide to sell. You may even decide to sell your 8 unit building and buy a couple of four unit buildings to get 30 year loans. You may want to just refinance your building for the amount you owe. There are several options, but it is always good to know your plan earlier than later.

” I never worry about the problem. I worry about the solution.” Shaquille O’Neal

What we at PRS PROPERTIES CAN DO. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparables in the area of your properties. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.