Orlando Multifamily Market Report: Multifamily Financing

April 28, 2021 | Market Insights

A roundup of Garrett Fierstein’s expert advice from our recent multifamily financing event

100units.com recently hosted an exclusive multifamily financing event for multifamily owners with guest speaker Garrett Fierstein, Senior Director at MMCC. 

During this virtual event, Garrett discussed the current market, best financing options, how to optimize investments to get the best financing possible, and much more.

Join us as we explore Garrett’s key takeaways about the current state of the multifamily market in our Orlando Multifamily Market Report. You can find the link to watch the virtual event in full below.

Basic Market Overview

Garrett began by discussing the basic market overview. The 10 year treasury is currently around the 1.70% mark — to put that into perspective at the start of the year on January 1, it was at 0.93%. There is an uptick in treasuries as we begin to pull out of the pandemic, the lowest was in August 2020 at 0.50%. The two year treasury is around 0.15%.

When we first entered the pandemic, we were in more of a recession, so the treasury yield was flat. As we begin to pull out of the pandemic and back into a growing market, you’re going to see an uptick in the treasury yield which points to a growing economy. Jerome Powell, Federal Chair, recently stated that the economy is recovering faster than expected and reiterated that the Fed will only begin to slowly remove accommodations once we have “all but recovered.” 

“Will we see higher rates by year end? Definitely in the 10 year treasury, but what I’m seeing on my end — we’ve seen this uptick in treasury yields, again it’s up double from the beginning of the year — is that when it comes to a local lender standpoint — from the banks, from the credit unions I’m doing deals with locally — their rates have stayed consistent through the last year and a half when rates started to bottom out,” Garrett explained.  

Garrett continued, “If the treasury crosses the 2% mark, does that make a huge difference? When it comes to the local lender standpoint, probably not as much. When it comes to Fannie, Freddie, anything that’s priced off the treasuries, then yes you could see some increase in pricing from the agencies. That being said, they always have the capability to sharpen the pencil and always be extremely competitive.”

As for the market on both a local and national level, it’s been extremely active and competitive — inventory is very low, cap rates are historically low. There has been a return of several more super regional banks, like CenterState, Seacoast, that were on the sidelines during the pandemic.

“The biggest item to note is for any investor going into a deal, I would recommend you understand how your lender is going to underwrite the deal because at the end of the day it’s going to make or break your financing. That can be a simple question to the loan officer you’re working with: “How do you guys underwrite your deals? How do you stress your deals from the financing side?” Garrett advised.

Garrett’s central piece of advice is to become really good friends with your brokers because you want them showing you deals first.

Graph illustrating the current trends in interest rates as relates to the current multifamily investing market

Current Trends

Garrett then referenced the above slide deck from a recent MMCC capital alert to discuss current trends in the market. The slide shows the average cap rate for the past 20 years compared to the 10 year treasury for the past 20 years. 

As you can see, cap rates are compressing, but there’s still a healthy spread between the average cap rate — on a national level — compared to the 10 year treasury. Interest rates are also expected to rise over the next 6 months.

“There’s an accelerated demand for buyers, people wanting to refinance, people who want to enter the market and buy deals. Even though the cap rates are compressing and interest rates are rising, it hasn’t gotten to the point where anything doesn’t make sense. Rates are historically at an all time low, there’s still — speaking from a multifamily angle — a lot of deals that still have a lot of meat on them from a value add standpoint, from potential rent increases, potential additions you can make to your properties to increase your cash flow,” Garrett explained.

Garrett continued, “If you’re purchasing a deal now, even if it’s at a lower cap rate, you’re locking in the great financing for 5-10 years and you have the ability to continue to increase the upside in the property for a long time and better the deal because you’re going to have great financing in place for a long time.”

Current Lending Overview

After current trends, Garrett discussed the current lending overview and the options he’s seeing locally. From the bank side, most bank and credit union lenders are doing their straightforward product which is a 10 year term and a 25 year amortization. 

Garrett is working with several lenders right now that aren’t out of market, but aren’t based locally that are offering 30 year amortizations which is really nice for multifamily financing, more specifically in Central Florida, because all the local banks here don’t usually offer 30 year amortizations unless it’s on a brand new asset.

Right now, banks are going to be recourse lenders unless you’re below a 55% loan to value. You do have the ability to get a year or two of interest only (IO) especially if you’re buying an asset. If you’re buying an asset, Garrett recommends at least asking for a year of IO to get a little additional cash flow upon take over.

He shared that there are hardly any banks in Central Florida asking for COVID reserves right now. At most, it’ll be 3 months, but it’s not something he’s seeing a lot of except on a case by case scenario.

The agency markets have also been pricing deals well. They have gone up significantly in the past couple of months. For agencies right now, you can get up to 80% loan to value, their rates on the small balance side are really low 3’s to 4%+. The terms are pretty flexible, you can get up to 30 year fixed — 90% of the people Garrett works with do a normal 10-12 year term and a 30 year amortization. 

Overall, Garret said that the main reason investors choose agency financing is for the 30 year amortization, 10 year fixed rate and non-recourse financing. The biggest deterrent is the prepayment penalty.

When choosing your financing, Garrett recommended that you should be thinking, “What is my goal with this property? How long do I want to hold it for? You need to think about what’s most important to you, what your investment strategy is, and decide accordingly.”

Garrett concluded this portion of the event by discussing bridge loans. “There is a good product for multifamily financing specifically which is a bridge to Freddie execution where you still get a really competitive bridge rate in the mid 5% range which you hold for two years or however long it takes you to make the improvements to the property and then you roll it straight into a Freddie small balance loan,” Garrett advised. 

Advice for Next Steps

For the final portion of his presentation, Garrett talked about next steps for people who are interested in buying or refinancing. Essentially, it’s a list of everything you need to submit to a bank to present them with a full loan package. 

Garrett recommends including:

  • 2-3 years of tax returns and K-1s
  • Personal financial statement and schedule of real estate
  • Most recent bank/brokerage/1031 statement to show proof of liquidity
  • Resume/bio to speak to who you are, what you do professionally, your experience in real estate, and any other projects you can speak to that show your experience
  • Copy of Driver’s License and passport 

“The faster you have these items to your bank or mortgage broker, the quicker and smoother the process goes from the lender side,” Garrett concluded. 

Garrett takes questions from the audience on Zoom at the end of his multifamily financing presentation


At the conclusion of the presentation, Garrett designated a portion of his time to answering questions from those at the event. As a part of our Orlando Multifamily Market Report, we compiled the highlights from the Q&A below that we thought would be most beneficial for investors to learn from:  

Q: What advice or insights would you give someone going into a value add property where the cash flow is currently weak?

A: There’s a couple of different options. If it’s the kind of situation where the rents — the collections — are good, but there are a lot of expenses outside of the market in the property, there are several lenders who will underwrite rents collected and a current market expense for the property based off of the appraisal. If it’s a case like that, you can go under application with a lender who underwrites deals that way. If it’s a case, like a property that needs a lot of improvements, it might be best to go the bridge route. Again, there are hundreds of bridge lenders in the market, it’s a bit trickier if it’s a smaller dollar amount. It just depends on how much lift the property needs for the investment.

Q: What are some of the biggest rookie moves you’ve seen and how can we avoid them?

A: The biggest item from a seller’s perspective is a seller that keeps all of their personal expenses in a Profit and Loss Statement (P&L). If it’s not related to the property, banks don’t want to see payments on your truck, travels, etc. You might be running the deal that way for IRS or tax purposes, but when it comes to the actual performance of the property, banks don’t want to see those items in a P&L statement. It also hurts your deal, your cash flow, because you might get some rookie underwriter who doesn’t know how to back that out. As for rookie moves on the buyer side, the biggest ones are not performing, retrading, buyers who bring their own brokers, and not actually being there to buy the deal.

Q: If you were able to talk to an owner a year before they wanted to refinance their property, what would you tell them to do to get the property ready so they could get the maximum proceeds during the refinance? 

A: Assuming everything stays on it’s normal track, the bottom line is that you need to run the property as efficiently as possible. 

Q: Can you speak to the advantages and disadvantages to affordable housing, HUD (U.S. Department of Housing and Urban Development) financing, and things like that where there’s more government layers, but sometimes you can get in for better terms?

A: That’s by far the most aggressive financing in the market. Those deals take a very long time to close, but you can truly maximize your return on your properties through HUD financing. They have max leverage, lowest rates in the industry, but it just takes a very long time to close.

Q: What are COVID reserves like right now for banks and for Fannie Mae and Freddie Mac?

A: If you’re doing a fully leveraged deal, Freddie is 12 months and Fannie is 18 months. If you’re doing lower leverage stuff through the agencies, they are cut back. It’s 65% leverage through Fannie for 9 months and Freddie has the ability to cut it back to half as well. If you’re at low enough leverage, you can do away with it, so they don’t require it. I haven’t heard any direction on when they’re going to go away fully, although I’m sure they will in a year or two from now, but no one really knows.

Q: Are there specific lenders that you look to for properties that are vintage—older than 1970s, more around the 1920s–1950s/60s—that look more favorable on them?

A: There are no specific lenders I look to. The biggest thing is if you’re going to an agency, it has to pass an inspection. The main components of a property have to be suitable for living — electric, plumbing. For banks, they’re usually more lenient. A lot of lenders don’t require property condition reports on properties, as long as it’s not dilapidated you should be fine going the bank route.

You can watch the virtual event in full here. 

We want to say a huge thank you to Garrett for joining us for our first multifamily event of the year to share his expert viewpoint on financing. We appreciate your participation and continued partnership with the 100units.com team!

“Financing is such a critical component of real estate operations, both purchasing and existing, it has such a large impact on the return on your investment and I really appreciate Garrett coming on, he’s done an excellent job,” Joe LaFleur, Multifamily Investment Advisor and 100Units.com Founder, said of the event with Garrett. 

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