1. See if the DSCR pencils with a 30 year amortization with at 10 year lock (most lenders won't go longer than 10 year lock on the interest rate, but some do and if so, explore those options). That may be enough. If not
2. Infuse equity capital: This can be done using the additional equity capital to pay points (interest up front) to buy down the rate.
3. Once the above are in place, breathe a sigh of relief, manage your development superbly, and if an when interest rate environment is better, refinance taking into consideration any prepayment penalties on the mortgage loan (preferably negotiate a loan without any such penalties).
Great advice, Mark. Pushing out the amortization would be the most impactful. I'm more and more optimistic we'll be able to work something out as conversations continue.
Recommendations:
1. See if the DSCR pencils with a 30 year amortization with at 10 year lock (most lenders won't go longer than 10 year lock on the interest rate, but some do and if so, explore those options). That may be enough. If not
2. Infuse equity capital: This can be done using the additional equity capital to pay points (interest up front) to buy down the rate.
3. Once the above are in place, breathe a sigh of relief, manage your development superbly, and if an when interest rate environment is better, refinance taking into consideration any prepayment penalties on the mortgage loan (preferably negotiate a loan without any such penalties).
4. Hold long term.
Best wishes.
Mark Preston
Great advice, Mark. Pushing out the amortization would be the most impactful. I'm more and more optimistic we'll be able to work something out as conversations continue.
As my late father said
“These deals are not easy to put together.”
As a consequence, he was a long term investor. He rarely sold, only doing so if absolutely necessary.
He sounds like a wise man!