Multifamily apartment owners have been very active in taking advantage of the low interest rates for affordable and market-rate apartments during the nation’s coronavirus outbreak. Interest rates are very favorable for both Agency and HUD FHA transactions.
Issues Arising from New Government Guidelines
There are several issues that lenders are dealing with at this time. The lenders are having to overcome many shelters in place orders that include social distancing affecting all third-party inspections which include appraisals and PCNA’s (Project Capital Needs Assessments). Trying to coordinate with residents and property managers could cause delays depending on the region in where the project is located.
Lenders are having to explore many avenues in obtaining information that is on record at municipalities that are either closed, or scaled down significantly. Many counties allow for electronic filing and recording of mortgages, but there is still a small percentage that require an individual to record. There are instances where jurisdictions are entirely shut down, and there is not an option to be able to record the mortgage.
There have been delays in multifamily apartment construction due to labor and material shortages. Delays have also occurred in zoning and obtaining building permits. There are locations that are more adversely affected than others. Many renters do not have a significant amount of savings, and if they are furloughed or temporarily laid off, they will be unable to cover their rent. Owners of multifamily apartments still obligated to pay their mortgage payments to the lender. It is a difficult balance between working with the renters and their families that are facing difficult times, and trying to work out payments that allow them to have money left for food, medicine, and other necessities.
Communication between Tenants and Landlords
This is an important time for multifamily apartment owners to communicate with their tenants. Many renters tend to avoid communication with their landlord due to fear or being ashamed. This leads to distrust between both parties. As long as there is open communication, many situations can be resolved with concessions, extensions of leases, and agreement to move out after a few months if the renter’s situation does not improve.
Ideal Time to Refinance Existing Debt
On May 1st 2020, many states are slowly lifting their stay at home orders and opening different sectors of the economy. This is a great time for multifamily apartment owners to take advantage of historically low rates. Refinancing and restructuring the existing debt on a project will increase the cash flow to compensate for any losses of income due to vacancies.
How Technology has Helped Multifamily Transactions
The use of technology has been instrumental in completing multifamily transactions at this time. Lenders, appraisers, and engineers are using technology in several different ways to navigate through these difficult times. There are many lenders that are reducing the usually required steps and procedures that are usually required in the third party reports. To help you stay on track, LSG has forms and calculators available to provide continued help with all your projects.