Tips to make your lender happy....

Tips to make your lender happy....real estate taxes and utility bills.   to continue with the information you need to send your lender to refinance or acquire a multifamily property it is time to talk about real estate taxes and utility bills.

Real Estate Taxes

Refinances are pretty straight forward.  If you have the bill we will underwrite to the current year tax bill.  If you don't have the bill we will look at the previous years and try to estimate some reasonable increase.  It only gets tricky if the property is due for a new assessment and/or you plan to do some substantial rehab to the building which would bump the assessment.

Acquisitions are tricky when the transfer of the asset triggers a new assessment.  That is particularly painful in states like Michigan.  The new assessment will most likely increase the real estate tax which will directly effect the net operating income.

Utility Bills 

Newer buildings are typically individually metered and the tenant pays their own utilities.  Older buildings are often master metered and either the tenant pays a set utility allowance to the owner or the utilities are included in the rent.   I even have one client that was able to negotiate their gas bill in advance for a three year period.  This was a huge benefit when prices were rising.  It really doesn't matter how your building is set up you just need to let your lender know what utilities are in the rent, what utilities are paid directly by the tenant, and what utilities are paid by the property.  If the utilities are paid by the property and reimbursed by the tenant make sure your financial statements clearly identify the reimbursements.

Holly Bray - Love Funding Corporation - 202-887-1849