The multifamily real estate market has been on the rise in recent years. Real estate research company CoStar Group, for example, reported that loan originations increased by 26 percent year over year this past third quarter. Will that growth continue in 2017?
Commercial real estate brokers should be aware of two factors that are likely to have a major impact on the multifamily market in the year ahead: interest rates and deregulation. Rising rates could potentially slow multifamily loan-origination growth to a snail’s pace, compared with recent years. President Donald Trump’s move to pare down financial regulations, however, could have the opposite effect, at least in the short term.
Just like all sectors of the market, the multifamily real estate landscape is rapidly changing in the wake of rising interest rates and the election of a new pro-deregulation president. The combination of those factors could have a significant impact for mortgage brokers serving the multifamily real estate industry.
The Federal Reserve raised short-term interest rates for the second time in a decade in December 2016, and it again boosted rates this past March — for a total bump of a half percentage point, raising the federal-funds target rate to a range of 0.75 percent to 1 percent. While the recent increases were relatively slight, they are only the beginning of what is expected to be a continuing upward push on rates. This is underscored by Fed officials predicting rates will rise two more times this year.
Trump spoke out in favor of raising rates during his presidential campaign, contending a rate bump would pop a “big, fat, ugly bubble.” As demonstrated by his recent executive order aimed at scaling back regulations enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, he intends to keep his campaign promises.
Currently, the multifamily market remains strong. In fact, the Association of Foreign Investors in Real Estate said multifamily assets represent one of the most sought-after investments. This presents an opportunity for mortgage brokers already in the multifamily real estate sector and also for those looking to expand into an area with a large potential for growth.
With that in mind, there are some major changes in store for multifamily real estate lending that brokers should be watching for in the coming months and years. In the face of those changes, and as rates rise and regulations are stripped away, new opportunities for brokers also are emerging, especially in the nonbank lending arena.
There is evidence to suggest that lending in the multifamily market may slow down. When it becomes more expensive to borrow money, as it does when rates rise, then multifamily real estate projects have a more difficult time making the internal rate of return necessary to secure deals. That means fewer deals happen, unless lenders and mortgage brokers work together to think outside of the box.
At the same time, there is evidence that lending may speed up as a result of executive-branch regulatory overhauls. Experts are predicting Trump will deregulate banks enough to make it attractive for them to increase lending. Trump announced plans this past February for “cutting a lot out of Dodd-Frank,” to make it easier for businesses to borrow money. With fewer barriers, banks may originate more loans and take advantage of the potential to enjoy higher spreads afforded by rising rates.
To cover all of their bases, mortgage brokers may want to consider widening the financing options they typically recommend to clients to include more nonbank lenders. As rates rise, additional means of securing financing may become necessary for multifamily real estate investors.
While the short-term possibility exists that banks will increase lending in the advent of Trump΄s new deregulatory policies, his unpredictability and isolationist stance on trade — as well as his immigration policies — are making many people nervous about what the future holds for the global economy, which ultimately affects markets on the home front.
“ There are some major changes in store for multifamily real estate lending. ”
Rising rates alone can result in financial institutions lending less because the cost of lending goes up. Any sharp stock market drop prompted by investor uncertainty in the strength of the nation’s economy would amplify this effect. Either of these potential circumstances, or a combination of the two, could lead to a reduction in the volume of multifamily real estate investment deals that get off the ground.
To better illustrate the point, here’s an example: If investors typically received around 80 percent leverage on a project and, as a result of rising interest rates and stock market uncertainty, banks choose to lower the amount of leverage they will offer to 60 percent, it creates a 20 percent financing gap. That gap has to be covered if the project is to move forward. If the stock market also is in turmoil, the amount of capital available from equity investors to cover the gap also is diminished.
For mortgage brokers comfortable with a second position in such a deal, however, that 20 percent financing gap represents an opportunity to help clients get creative with their capital stack. That means having access to alternative sources of financing is key.
Bridging the gapGiven the chance, nonbank lenders will make up the difference on underfunded projects. Private lenders or private equity structures are a natural next step for securing the extra funding necessary to make multifamily real estate transactions happen. They offer several advantages over traditional financing, including:
The cons, of course, include the fact that nonbanks often extend loans that have higher interest rates than banks offer, and the loan terms are usually shorter than what banks offer. Still, when a deal is on the table and a lack of funding is the only thing in the way of moving it across the finish line, higher interest rates and shorter terms are a price many multifamily real estate investors are more than willing to pay.
• • •
With the inevitable changes on the horizon because of rising interest rates and a new president in the White House, commercial mortgage brokers would be wise to consider steering borrowers who are seeking multifamily financing toward nonbank lenders — in addition to pursuing traditional bank loans. Now is the time to reach out and solidify existing relationships with private lenders and to establish new connections.
Mortgage brokers should always be prepared, especially when the market moves. By keeping an eye on emerging trends and shifting your strategies based on these insights, you will have the advantage early in the game — before the market changes the rules.
This article is written by: Yuen Yung
Yuen Yung is chief executive officer of Casoro Capital, a private equity company that creates discretionary funds for investing in multifamily properties and developments. With Yuen at the helm of Casoro Capital and in partnership with The PPA Group, the companies have achieved more than $600 million in multifamily transactions. Yuen earned a bachelor's degree in business administration from the McCombs School of Business at The University of Texas at Austin.
The evaluation of a real estate project is where the money is made. Despite what others say, the real estate transaction will be riddled in details. In this video we will go over the basics of an evaluation and what you should keep your eye out for.
There are only three real objects when it comes to commercial finance and real estate. Commercial real estate is a more sophisticated matrix for wealth creation in this country. What this means is that the common exit strategies are either to sale via a trade or to refinance. There is no other exit strategy.
In reference to performing a mode of action you are given three strategy options:
The most skilled professionals pride themselves on Capital Placement and Formation. You may of noticed that throughout the last few years lending has tightened increased the amount of equity that is needed for a traditional institution to fund a deal.
Although this is common in a lower market this gives others the ability to leverage this intellectual capital. The rave in 2010 became syndication. During 2009-2010 Warren Buffet paid frequent trips to Washington DC to have series of questions in reference to this very thing. By 2015 the process of Syndication has become less regulated allowing a slew of investors and speculators to aimlessly exchange or trade their hard earned money for potential earnings via equity.
What most are uneducated about is that equity is not all that it cracks up to be. Equity is the opportunity to obtain the highest gain, while not truly securing your investment.
Asset Arbitrage is typically performed is something is being traded at a low basis point for its existing market. This creates a win-win situation for both the operator and seller. 2017 is expected to have higher amounts for exit strategy meaning that value will be stiffed at lower returns due to others exiting on the height of the bell curve.
Capital Placement is the process of placing the proper debt on a property that will perform well especially if stabilized. With rates expecting to increase it is important to place capital on the proper groups of assets.
Capital Formation is also know as the debt stack this can often refer to having the capital organized in a way where either the institution, lenders, investors, equity partners and sponsor has priority or is protected.
If you are a web developer or a marketer looking for a great opportunity, look into joint ventures. Keywords: business
If you are a web developer or a marketer looking for a great opportunity, look into joint ventures. Joint ventures are a great way to combine talents and create a winning product. Many people who have been successful at joint ventures came to the plate with one strong talent, whether a winning product or a great network to sell products. By combining your forces, you can create synergy and a healthy profit. Here are some tips on joining joint ventures.
Joint ventures are very easy to create. There are plenty of web sites that offer people the opportunity to post their business propositions online for other to see and consider. Many developers and marketers check out JV opportunities weekly looking for the next big product. For instance, many web developers use affiliate sites to sell quality products to the masses that offer huge commissions. Affiliate sites such as Clickbank, Commission Junction and even Amazon help small web developers sell their merchant’s items. You can also look at web forums for vendors or marketers that are looking to team up and make a healthy profit. So if you only have one piece of the puzzle, but still want to be successful, look into joint ventures and create a relationship that will benefit both parties involved.
Build Up Your Business Credit It is very important to build up your business credit scores to be able to avail of financial loans to fund your small business. In truth, small enterprises are now clamoring about for loans to improve their business by using the money for improvements, or purchasing inventory to meet consumer demands. Building up your business credit takes a lot time and effort, and requires a paper works by the dozen. Here are some tips on how to get started in giving your business credit rating a healthy boost: Set a business identity first The first step in improving your business credit is to get one in the first place. This can be done by registering your business as an LLC or a corporation. Next you need to provide all the necessary paper works required by lenders such as legal document like business permits and licenses, financial statements, references, contracts, and so on. You need to keep in mind that when you register your business as an independent entity, you need to have a fixed address of your business, as well as open lines of communication. (Note that P.O. Box is not acceptable as a business address) You might also need to register your business in a credit agency so they can keep tabs on your credit ratings and scores.
These organizations will act as reference when you apply for a financial loan that requires a valid credit report. Building up your credit status will depend on the financial stability of your business as based on the financial documents during its operation. Also, prompt payments are a major issue when it comes to raising your credit status. Fail to pay on the date agreed; you get a negative score on your credit score if that happens. You might also need to keep monitor credit card reports when they are delivered to you. Try to check for transactions that you did, or did not, make. If you spot an error, report it immediately to the corresponding agency. This will result to a higher credit rating. Get a loan Before you can actually improve your credit scores, you need to have a credit to work with. Many small businesses are now opting for business credit cards to improve their ratings. One reason for this is that these plastics have reduced interest rates and APR, which is quite useful for making prompt and affordable payments. Also, since business credit cards have no principal amounts attached to them, you can easily control the interest expense you make every month. You can do some budget planning to minimize expenses and maximizing profit, without worrying about interests piling up. Another way to improve your credit status is through credit lines. Many financial institutions, like banks, are now offering short-term lines of credits (LOC) for small businesses, with easy payment terms.
Since interest expense on LOC is dependent on the principal amount, you can easily reduce it by paying the original debt until you reach zero. With this term in mind, you can easily make prompt payments according to the agreement between you and the lender. The gist to build up your business credit is to make prompt payments on your debts. Whether you have multiple loans or tons of credit cards at your disposal, you need to make sure that you pay each one on its designated date. If done right, you are well on your way to improve your credit scores, which in turn, will improve the financial future of your business.
Need to create a pool of quality clients? Try these five easy steps.
So, it is that time. You are a working designer who has built a solid portfolio. You are as experienced generating concepts as you are comfortable sending them to print. You have carefully weighed your options and are finally ready to begin working for yourself. Congratulations! Now what do you do? Assuming you are equipped to handle the administrative functions of trekking out on your own (which is another article in itself), the next step is to begin building a client base. However, if you want to be successful in this highly competitive profession, you must not only build a client base, but you must build a solid client base. To help you on your way, I have complied five tips for building and improving your client base that I have found useful in my own work:
1. Form Partnerships with Other Vendors: When I was first getting started, my company was able to secure a contract with four major print centers which referred all of their clients who needed graphic design and typesetting work to us. In turn, we would complete the project and send the job back to the center to be printed. Not only did this provide us with a steady workflow, but we also established valuable relationships with new clients who would trust us with work in the future. I highly recommend forming relationships with other vendors. Print shops often need designers who can provide them with print-ready files, small marketing and public relations firms often need a reliable designer they can send work to, and many designers get overloaded with work and would love to pass some on to others in need of it. Get out there, make friends, build relationships and you will find good work.
2. Network, Network, Network! As you grow your list of contacts, you will find that something good starts to happen; you will gain momentum. When you build relationships you will find that the best way to gain new clients is through your established ones. Be clear to all of your clients about the services you offer and they will remember you the next time they hear of someone with a need you can fulfill.
3. Charge What You Are Worth. This is one of the most difficult things for a designer when they first begin to freelance. Inevitably, the temptation to discount your work will always come. The most frequent phone call I get is one where the prospective client needs something “simple” but really means “cheap.” Resist temptation. While there are times when these phone calls can lead to valuable client relationships, the majority will often lead to more calls asking for discounted work. Run the numbers beforehand. Establish your pricing and be clear about it with your clients. If you find that you absolutely must accept discounted offers, clearly represent how much you would normally charge and mark the discounts on the final invoice. This way, your clients will at least know what you would usually charge when they recommend you to others.
4. Learn How to Say No. Learning how to decline projects is an integral part of working on your own. Bad projects eat your time, create frustration, and cost you money. Establish your criteria for accepting a project and stick to it. You are much better off seeking and planning for the right job, than you are accepting the wrong one. Accepting only the good jobs will help you network with the right kind of clients and produce better work for you in the future.
5. Stay Focused. Focus! Focus! Focus! This is more of a tip for internal use than it is to outwardly seek clients. However, it is the most important advice I can give. So many projects remain incomplete because designers lose focus and turn their attention elsewhere. Whatever your goals are, write them down, create a plan, and stay focused on achieving them. Designers who run a tight ship are almost always the ones who achieve success in this industry.
If you haven't realized already there are multiple Booms throughout the United States in various markets. Currently one of the markets that our base focuses on is the Indiana and greater Indianapolis Markets.
Within the greater Indianapolis market is a submarket north west called Boone County.
Although with slow beginnings the area has become a quite and niche hot bed. Here are the economics behind its boom.
Single family inventory has decreased almost 10%from last year while both closing and original asking prices are almost identical. This means that the average listing is going for exactly what they're asking for. This means that the Seller is in control. This gives a key indicator that the current market in Boone County is heading to a peak in their Boom.
What started this Boom in Boone?
The answer is multifamily señor living (2016):
What the new development has contributed to is the development of Residential Homes to couple to senior population and the expansion of a Walmart in Zionsville.
The full combination with the Economic Impact creates a Boom in Boone County. How long will the Boom last?
Typically a healthy Boom consist of 10 consecutive years, with the average lasting 3-4.
Multifamily is still strong. Our Advisors checked out some of the market research both nationally and in specific micro markets in the midwest.
Multifamily is still strong and is the best bang for your buck.
Link: Additional Research
Part of our research was done via US Census Bureau and Marcus Millichap.
Last week Naval Ravikant went to an industry dinner. He asked a friend in the venture business how things were going. The friend slumped over in his chair, shrugged sadly and said, "The business is becoming commoditized."
It's an extreme interpretation, and not everyone shares it. Times have never been better for a handful of firms who are rolling in the returns, raising as much from LPs as they want and still doing business the way they always have.
But matters have also never been more polarized for the VC-haves and have-nots, and this sad-sack VC has a few people to blame. Chief among them is his friend Ravikant, whose site AngelList has dragged the stealthy, back-room world of venture capital kicking and screaming into the light -- something many industry watchers never thought could be done.
And now, AngelList is doing the same thing it did to VCs to recruiters. But we'll get to that in a minute.
People have wanted to dismiss the potential of AngelList ever since it launched. At first, people said only loser companies would want to share data and telegraph fundraising plans so publicly. Then VCs said they'd never invest in something that didn't come through traditional channels. Other VCs said they'd never do something as banal as leaving "comments" on a company's profile. They'd have those conversations privately or not at all.
But the AngelList juggernaut has steamrolled right through those objections. And now, it's not even just about seed deals. Yesterday, we wrote about the first large Series A completed on the site, when Rally raised a remarkable $7.9 million round.
The important thing about the Rally deal: This was a Valley company with two big leads in Floodgate and Greylock. It could have done the round the traditional route, but chose AngelList instead. This is the thing: AngelList is not about everyone being able to raise money or everyone being able to call themselves an angel. It's about the very best companies actually choosing to operate out in an open platform. The image that so many people hoped for -- that AngelList would only be the trolling ground for the desperate, for the unconnected -- just hasn't proven true.
And that's exactly what some people find so scary about it.
In the case of Rally, Ravikant argues the referrals from AngelList converted at a much higher rate than emails existing investors sent, because the social niceties were stripped out of the transaction. Put another way: If an investor on AngelList signals interest, they are truly interested. If a friend of Mike Maples says, "Ok, I'll take a look, Mike," he may just be being polite.
What's scary about AngelList is it strikes at the heart of what VCs have held dear for decades: Proprietary deal flow. "The Holy Grail is finding a company before anyone else," Ravikant says. "That is disappearing. The idea that you are the only investor to see this deal is highly, highly, highly, highly unlikely." (That's four highlys, if anyone was counting.)
It's hard to overstate how terrifying that idea is for the Valley establishment. Partners are hired because they have proprietary deal flow. VCs sell that to LPs as the reason to invest in them, not the VC next door. The desire for more of it is why we recently discovered that venture firms were paying entrepreneurs to secretly invest on their behalf.
Everyone wants to know about the hot new deal before anyone else. That's how you make your money in the venture business. And AngelList and Ravikant are standing on a hill screaming that the Web, tech blogs, and sophisticated entrepreneurs have destroyed the idea of proprietary deal flow forever. Pour the sad sack VC at dinner another drink. For most of the Sand Hill Road, that is very, very bad news. And, whether fans of AngelList or not, most will still tell you it's flat out not true, that deal flow is still very much alive and kicking.
Still, you can't deny AngelList's burgeoning power. While uncomfortable and threatening for some, it has caused a full-on stampede on the site. We use AngelList to provide widgets at the end of our stories, and it's hard to find a new startup, no matter how nascent, that doesn't have a profile on the site already. Globally, angels are fighting to get listed.
It's significantly harder to invest via AngelList than it was to buy secondary shares in Facebook. Not only do you have to be an accredited investor, but AngelList has to verify that at least two investments you've made were pure cash investments. Someone else in the community has to approve you. And even then, you are on probationary status. There are 3,500 angels on the site, which sounds like a lot, until you realize there are more than 20,000 applications in the system.
Here's the thing: Those 20,000 likely aren't getting in. At least not any time soon. "We stopped going through the inbox," Ravikant confesses. It's just too hard to process manually, and they are working on a better way to process the ever-growing queue of hopeful names. "The only way someone gets ahead now is if someone I know emails me and says they should be added as an investor," he says.
The caution signals that even Ravikant is a little scared of the power of what he has built. When we talked about the millions in cash thrown at Rally over his platform, he could have strutted around bragging about the power of AngelList, lobbing smug told-you-so's at the haters. He didn't. He repeated this several times instead: "I hope they make their investors money." That's how he knows he's really done something here.
Ravikant emphasizes repeatedly that AngelList isn't a king maker. At best, it's a king-enabler. It can only help great companies; it can't make a shitty company great. "We get 100 company profiles created every day," he says. "There aren't 100 companies that get funded every day. Just like YC and Harvard, the 1 percent are the ones that do well. The next 2 to 3 percent do okay. We can't make an unfinanceable company financeable."
"This is the biggest misconception," he continues. "People put up this tiny, little profile saying they'll be the best food recipe site on the planet, with no data or information and later they're complaining on Twitter that AngelList didn't work. You have to put a lot of information up there; a lot of companies aren't comfortable with that."
Ravikant takes who does what on his platform very seriously. He doesn't want it to be an example of some wild 2010s-era exuberance that people point to a decade from now, the way everyone mocked Draper Fisher Jurvetson's failed "meVC" fund after the dot com crash. He doesn't want this to end in tears. He doesn't want this to be a flash in the pan. He wants this to change the way the venture business works, for the better, forever.
"This is fun, but it is moving very, very fast," Ravikant says. "VCs invest over four year cycles with ten year vesting cycles. Look at how much the business has changed in the last three to four years."
He tells me about a startup who is raising money now, with a flood of recently minted Facebook money anchoring the deal. "When they told me the price, I almost fell out of my chair," he says. "There's a lot of recycling of capital going on. There's a lot of madness in this market."
Ravikant has long said he has a big vision for AngelList, but won't talk much more about what that is. But eagle-eyed startups may have noticed another part recently: a talent vertical. Go here to see it. Rather than operating like a normal job board, it matches people who failed to raise money or whose startup didn't work out with companies that have yet to raise money.
It's an ingenious approach, and true to AngelList's savvy use of technology to shortcut real-world inefficiencies. Most startups who can't find talent complain that too many people are starting their own companies, and that drains the market of would be CTOs and VPs. AngelList finds the ones that don't quite work and efficiently feeds that talent back into the system.
And it seems to be working.
These days, AngelList is facilitating some 200 mutual introductions per week between startups and investors. It's taken years to get to that velocity. But in just the last two weeks, the talent vertical -- which AngelList never announced and almost no one has written about -- is doing 600 mutual introductions a week between talent and startups looking for talent. "It's already three times the velocity of the fundraising side of the company," Ravikant says.
If you thought finding funding was a challenge for startups, AngelList has struck at the motherload of startup angst by taking on the war for talent. This could cause an even bigger impact in the startup world.
Of course, those are my words, not Ravikant's. He shrugs, "We're just a tool in the tool belt. Hopefully the best. But just one tool."
(I should disclose that I met Ravikant, when PandoDaily first launched, to talk about partnering up to provide widgets on our stories. There's no financial relationship between the companies, and there's no information they give us that you can't get on the site itself. But we clicked immediately, because we were both underdogs trying to bring this industry into the light, and both have a very long term view. He's agreed to be our guest at PandoMonthly in November where he's promised to share much more about AngelList's big vision. It should be a good one.)
Top 20 Consulting Businesses Thriving
Consulting Businesses Thriving Today although you can be a consultant in just
about any field these days, the current top 20 consulting businesses
1. Accounting: Accounting is something
that every business needs, no matter how large or
small. Accounting consultants can help a business with all of its financial
2. Advertising: This type of consultant is
normally hired by a business to develop a good strategic advertising
3. Auditing: From consultants who audit
utility bills for small businesses to consultants who handle major work for
telecommunications firms, auditing consultants are enjoying the fruits of their
4. Business: Know how to help a business
turn a profit? If you have a good business sense, then you'll do well as
a business consultant.
After computer consulting, people in this field are the next most sought
5. Business writing: Everyone knows that
most businesspeople have trouble when it comes to writing a report--or even a
simple memo. Enter the business writing consultant, and everyone is
6. Career counseling: With more and more
people finding themselves victims of a corporate downsizing, career counselors
will always be in demand. Career counselors guide their clients into a
profession or job that will help them be both happy and productive as an
7. Communications: Communications
consultants specialize in helping employees in both large and small businesses
better communicate with each other, which ultimately makes the business more
efficient and operate smoothly.
consulting: From software to hardware, and everything in between,
if you know computers, your biggest problem will be not having enough hours in
the day to meet your clients' demands!
services: From producing newsletters to corporate annual reports,
consultants who are experts in the editorial field will always be
10. Executive search/headhunter
firms: While this is not for everyone, there are people who enjoy
finding talent for employers.
11. Gardening: In the
past decade the demand for gardening consultants has blossomed (pun intended)
into a $1 million-a-year business. Not only are businesses hiring gardening
consultants; so are people who are too busy to take care of their gardens at
12. Grantsmanship: Once you learn how to
write a grant proposal, you can name your price.
resources: As long as businesses have people problems (and they
always will), consultants in this field will enjoy a never-ending supply of
corporate clients, both large and small. (People-problem prevention programs
could include teaching employees to get along with others, respect and even
violence prevention in the workplace.)
Insurance: Everyone needs insurance, and everyone needs an
insurance consultant to help them find the best plan and pricing for
15. Marketing: Can you help a business write
a marketing plan?
Or do you have ideas that you feel will help promote a business? If so, why not
try your hand as a marketing consultant?
management: Everyone needs to get paid. By using your knowledge
and expertise in payroll management, you can provide this service to many
businesses, both large and small.
relations: Getting good press coverage for any organization is a
real art. When an organization finds a good PR consultant, they hang on to them
18. Publishing: If you're interested in
the publishing field, then learn everything you can and you, too, can be a
publishing consultant. A publishing consultant usually helps new ventures when
they are ready to launch a new newspaper, magazine, newsletter--and even
websites and electronic newsletters.
Taxes: With the right marketing and business plan (and a sincere
interest in taxes), your career as a tax consultant can be very lucrative. A tax
consultant advises businesses on the legal methods to pay the least amount of
20. Writing services: Anything
related to the written word will always be in demand. Find your specialty in the
writing field, and the sky will be the limit!