Landlord Friendly Financing? Seriously?

dennisfassett.comThis is pretty amazing.

I was looking around for some new ideas on how to finance additional rental properties, and I happened to find something that was pretty surprising…..

…… that a monster-sized hedge fund – BLACKSTONE no less – has started offering financing specifically focused on rental property owners.

Yeah. To say I was shocked was an understatement.

I mean, Blackstone has been the bad guy as they hoovered up all the good deals in many areas over the last several years.

But that has apparently changed.

I have never been very fond of conventional lenders. They don’t like rental properties, and back before and during the crash they kept making it more and more difficult to get their approval.

In fact, the process to get my 10th conforming mortgage took SIX MONTHS to accomplish. Partially due to the broker’s incompetence, but most of it was due to the lender changing he rules of the game as the game was being played.

So the fact that an organization is now landlord friendly is a great thing.

I’ve included the text from the press release below, and there’s a link to their lending site as well if you’d like to get more information.

Let me know how it goes if you decide to reach out to them.

Here’s the press release from Blackstone….

Choose Wisely! Because Location Matters.

choose-wisleyI wrapped up the sale of one of my apartment buildings a couple of weeks ago. Part of that process involved meeting with one of the city building inspectors, as I was in the middle of my second bi-annual rental property inspection per their ordinance when we closed.

The process went smoothly, and I was (again) pleasantly surprised by how down to earth and practical the building department was to deal with over the term of my ownership.

And as I thought about it, i realized that pretty much all of my interactions with the building departments in cities where I own rental properties have been good to great. (I say pretty much, because because I have one rental that was a flip that I couldn’t sell, and I wouldn’t have bought a long-term hold there.) And that has really helped make my ownership experience a pleasant (and profitable) one.

As I thought about it some more, I also realized that this wasn’t by accident.

Pay MORE. Buy BETTER. Buy FEWER.

I just got into it AGAIN on my facebook page (shameless plug: facebook.com/CashFlowMercenary) with someone else pitching cheap-ass properties in bad areas with Section 8 tenants as the Holy Grail for buy and hold investors. He came on my page with an unsolicited pitch for his properties, and then really got his panties in a bunch when I pressed him on his ROI “projections”.

It’s an epidemic I think. More than just the flavor of the month this time. And I just finished doing battle with a bunch of clowns doing the same thing with Detroit properties here in my area.

I don’t know what’s wrong with me. It seems that all these other investors out there know the secret to finding magic properties that are really cheap because they’re in bad areas, that Section 8 tenants love and stay in forever so they don’t have vacancies, and that are so solid and well cared for buy their Section 8 tenants that they never need repairs and maintenance.

See what I mean? Magic. Pure and simple.

Oh No – Not Another Google-Research Apartment Forecast!

It’s a race I guess.

Every time a quarter end gets close, all the economists start falling all over each other to be first out with their forecast for the next quarter. Having studied Econ myself in college, the one thing I’d really like to see is a scoreboard that shows how accurate these past forecasts are.

But that’ll never happen.

Because as soon as people saw how consistently worthless the forecasts are, and how they have literally zero correlation with reality, then the whole field of Econ would implode just like the American banking system is about to. And good riddance I would say.

So past accuracy notwithstanding (and apparently irrelevant), we have yet another forecast out.

This one was done by Marcus and Millichap, and they included their forecasts for 39 different metro areas in the US.

Ok – I decided to bite. I’m active in the apartment business here in metro Detroit. I own a couple of buildings, manage one myself, and I’m looking for more units to buy. I’m certainly no total “market expert” because this market is huge. But I am pretty knowledgeable. So I downloaded the “Detroit Metro Area Market Update”.

It only took one glance to see that they have no clue about this area.

Their headline read: “GENTRIFICATION EFFORTS WILL BOOST RENTER DEMAND”

And they went on to write: “The revitalization of downtown will lure major companies to the urban core, sparking long-term demand for rental units in the area, while lucrative concessions will bode well for the suburbs.”

My first thought was to check the date on the article to find out when it was written.

I don’t know about you, but I’ve been hearing about how downtown Detroit is ready to explode in population and popularity (and NOT Molotov cocktails) since I worked (but didn’t live) down there in 1986. And then again when Dennis Archer was elected mayor in 1994. And then again when Kweazy Kilpatrick was elected in 2002.

And now we’re hearing it all over again with Bing.

But just because Blue Cross and Quicken Loans have moved some people down there semi-recently doesn’t mean they’re going to live down there too.

Did Compuware cause a huge surge in rental demand when they moved downtown? Uh, no.

Do you remember back when that little company called General Motors moved their entire HQ (and then some) into the Ren Cen back in the 90’s? Did that cause a housing and rental surge?

Yes actually that one did. In Grosse Pointe.

Which makes my point that these forecasts aren’t worth horsesh*t.

This one in particular reads like it was written by someone who used google searches as their primary source. Especially some of their employment forecast numbers.

You can get your own copy of this forecast for any of the 39 Metro Areas by visiting this link. Registration is required. https://secure.marcusmillichap.com/SignIn.aspx?ReturnUrl=http%3a%2f%2fwww.marcusmillichap.com%2fservices%2fresearch%2freports%2fdefault.aspx%3ftab%3d1

Read it at your own risk. Or if you’d like a chuckle.

I’d be interested to hear your thoughts on this.

 

Multi-Family Economic Forecasts: Smoking Crack or Inside Track?

The real estate investment services firm Marcus and Millichap came out with an interesting statement last week.

The headline that their chief forecaster, Hessam Nadji, used was “Recovery Threatened, But This Is Not 2008”.

And he finished his overall summary by writing “The downgrade of the U.S. government’s credit rating by S&P has sent global stock markets into a frenzy, posing a threat to the already fragile U.S. economic recovery. However, there are stark differences between the current economic situation and the crisis in 2008. Amid renewed economic uncertainty, commercial real estate offers compelling investment opportunities.”

In the body of his piece he goes into detail and gives a litany of reasons why “this is not 2008”. And by that he means it’s not as bad as 2008 was. Surprisingly, he does identify the major issues impacting the economy right now, including

  • Over-speculation that exacerbated the spike in commodity prices
  • Super-charged liquidity spurred by Quantitative Easing 2 (QE2)
  • The tactical Band-Aiding of sovereign debt issues in Europe
  • Japan’s supply-chain disruption
  • A double-dip in U.S. for-sale housing

But not surprisingly he categorizes the impact of these issues as nothing more than simply “paper cuts”.

Paper cuts? Seriously?

Of course, after brushing off that collection of 900-pound-gorilla issues, glossing over stagnant economic growth and abysmal employment numbers, he concludes that “Apartments, in a league of their own, should continue the march down the recovery path.”

But he couldn’t resist adding a monster caveat . . .

“Unless we enter a massively downward spiral that leads to fear-based, not fundamentals-based job cuts, property operations should remain relatively stable in most sectors.”

A massively downward spiral.

The kind that will be triggered, in my observation, if any of his “paper cut” issues goes really bad.

So I’m having a bit of trouble with his circular reasoning.

Listen, I’ve made it no secret that I think the economy in general and real estate specifically are going to get a whole lot worse before they get better. And I think the items he mentioned together will be the catalyst for the substantial downturn that we’re facing. The impact of these issues won’t be zero, and they’re most likely to be a mot more significant that a paper cut.

But that’s just me. What are you seeing?

You can read the full piece by Mr Nadji here: http://www.globest.com/blogs/streetsmart/-313014-1.html