Case Study 104: Strategic Acquisition Financing for a Dallas Multi-Family Property

Acquiring a 20-unit multi-family asset in a dynamic market like Dallas presents a prime investment opportunity. However, success hinges on securing the right acquisition financing. This case study delves into the strategic considerations for financing such a property, offering insights into current market conditions, diverse lender options, and critical loan terms to ensure a successful transaction.

Dallas Multi-Family Market Snapshot

Dallas continues to be a magnet for real estate investors, driven by robust job growth, a diversified economy, and a steadily increasing population. The multi-family sector, in particular, benefits from strong rental demand, with competitive vacancy rates and rent growth outperforming national averages in many submarkets. Key factors shaping this vibrant market include:

Comprehensive Lender Options & Loan Terms

Regional & Community Banks

• LTV: Typically 65-75% for acquisition.

• Recourse: Often full recourse, though some exceptions for experienced sponsors.

• Rates: Variable (Prime + spread) or fixed for 3-5 years.

• Terms: 5-10 year loan terms, 20-25 year amortizations.

• Prepayment: Step-down or yield maintenance.

• Fees: 0.5% - 1.5% origination fee, plus third-party costs.

Life Insurance Companies

• LTV: 60-70%, focused on stabilized assets.

• Recourse: Non-recourse for strong sponsors/properties.

• Rates: Highly competitive fixed rates, often 5-10 years.

• Terms: 7-20 year loan terms, 25-30 year amortizations.

• Prepayment: Defeasance or yield maintenance.

• Fees: 0.5% - 1.0% origination fee, plus third-party costs.

CMBS Lenders (Conduit)

• LTV: 70-75%, based on in-place cash flow.

• Recourse: Non-recourse with standard "bad boy" carve-outs.

• Rates: Fixed for 5, 7, or 10 years, competitive pricing.

• Terms: 5-10 year loan terms, 25-30 year amortizations.

• Prepayment: Defeasance.

• Fees: 0.75% - 1.5% origination, plus rating agency and legal fees.

Agency Lenders (Fannie Mae/Freddie Mac)

• LTV: Up to 80% for stabilized properties.

• Recourse: Non-recourse for most programs.

• Rates: Fixed for 5, 7, 10, or 12 years.

• Terms: 5-30 year loan terms, 30 year amortizations.

• Prepayment: Yield maintenance or step-down options.

• Fees: 0.5% - 1.0% origination, plus lender and third-party fees.

Each lender type offers distinct advantages depending on the borrower's profile, property characteristics, and investment strategy. NextGen's expertise lies in matching investors with the most suitable financing solution to capitalize on opportunities in markets like Dallas.