“The person who makes the bank’s commercials is not the person who makes the loans.” Kurt Vonnegut

The FHA 223 F loan is a 30 year loan which has a fixed interest rate and can be used to purchase or refinance a multifamily property with more than 5 units. Having once gone through a difficult FREDDIE MAC refinance on a building I own, you may want to look into this type of financing before moving forward. Look carefully if you do.

DISADVANTAGES OF THE 223F Loan. The loans can be very difficult to obtain, both in the obtaining of approval, during the period you pay the loan and even when refinancing or selling. LONG PROCESSING TIMES. These types of loans can take 6 months to a year to close. This could be acceptable when refinancing, but could be difficult when you attempt a purchase, asking for a one year escrow. STRINGENT COMPLIANCE AND AUDITS. HUD inspections and annual audits, performed by a CPA. as well as replacement reserves which can be 1000. per unit typically. HIGH LOAN FEES. Application fees, third party environmental studies and upfront MIP (mortgage insurance premium) costs can be included. This goes along with prepayment penalties, making it potentially difficult to sell or refinance. Additionally, it can take 3-4 months to get a rate lock and limited cash distributions are all things that may have you considering other options.

ADVANTAGES OF THE 223 F Of course, there are positives to this type of financing. LTV- Borrowers can get up to 85% of value for market rate properties, up to 87% for affordable housing and up to 90% LTV for subsidized units. This can be a big consideration along with lower interest rates, backed by GINNIE MAE and the long term fixed rates are unlikely to be equaled with other loans. There is also the possibility of adding on the loan up to 40K per unit for rehabbing.

ALTERNATIVES TO THE 223F There are AGENCY LOANS (Freddie Mac and Fannie Mae) . These will give a temporary fixed rate loan. Usually 5-10 years with 30 years amortizations after which the loan goes to variable rate. BRIDGE LOANS “Hard money” loans usually require the minimum, these can be done very quickly, usually in a matter of days. Then there are PORTFOLIO LOANS These can be used on multiple buildings for “blanket loans” and usually have stiff prepayment penalties, such as defeasance. BANK PORTFOLIO LOANS are easier to get, but usually contain provisions for “recourse” which, unlike to FHA 223 F, requires a personal guarantee.

Depending or whether you are planning to keep your building long-term or it is a two or three year plan to sell or exchange, you should choose carefully because plans and situations sometimes change..

“Learn to use your emotions to think, not think with your emotions.” Robert Kiyosaki

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business or you may want to move into a more passive real estate investment, such as a triple net or a DSL.. 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 comparable in the area of your properties, so that you know what rental values are in your area. 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 are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also 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 45 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.