Guest Speaker: Blake Janover

As CEO of Janover Ventures, Blake Janover oversees the capital markets advisory, equity placement platform, digital and technology strategies for Janover Ventures and its family of sites including multi-family loans, commercial real estate loans, HUD loans, CMBS loans and dozens of others. He is an honorary member of the 2019 Forbes Real Estate Council and is regularly published in Housing Wire and other industry trade journals. Throughout his career, Blake has overseen the underwriting and origination of billions of dollars of commercial, multifamily and residential real estate loans with a core competency in FHA insured debt, GSA financing, CMBS loans, bank, debt fund, and other similar vehicles. He has run lead on LP equity syndications and advised on secondary-market bond-pricing negotiations. Additionally, he has advised borrowers on hundreds of multimillion-dollar real estate transactions, including complex, multi-layered capital stacks and the re-positioning of large multifamily, hospitality and assisted living portfolios.

What you’ll learn in this episode:

*Janover Ventures has the most robust presence on the internet for anything that has to do with multi-family financing. Among their other specialties are commercial real estate loans ($1 million and up). They have also built joint ventures with non-bank and bank lenders.

*In Blake’s opinion, there is a vast lack of knowledge about and organized, clear information on all the financing products available to buyers. For instance, there are sophisticated investors and real estate companies that don’t know you can get FHA insured multi-family debt for a market rate apartment building

*The difference between various HUD loans. Section 221(d)(4) insures mortgage loans to facilitate the new construction or substantial rehabilitation of multifamily rental or cooperative housing for moderate-income families, elderly, and the handicapped. 223(f) is for purchase or refinance of market rate properties of any class (cooperatives, affordable housing, or subsidized multifamily properties). 223 is for purchasing multi-family, an apartment building or for recapitalizing or refinancing an existing one

*The difference between a recourse loan and non-recourse loan. A recourse loan allows the lender to take action above and beyond selling the home through the foreclosure process to recover the mortgage debt. A non-recourse loan is a secured loan that is secured by a pledge of collateral, which the borrower is not personally liable for.

*Non-recourse loans are made in what’s called a Special Purpose Entity (SPE). It’s an LLC that owns that property and nothing else, and acts as a shield against the borrower from outside liability

*Most non-recurring non-recourse loans are subject to carve outs, sometimes called “Bad Boy” carve outs because of malicious conduct or negligence

*Most HUD loans offer ten-year terms, but if you go to a small bank or credit union, you might get a five year, fixed rate debt on a 20 year amortization. HUD is a self-amortizing debt. The exception would be HUD 221, which involves construction debt and those loans are fixed at two to three years. There is interest only during the construction period and then they convert to fixed and fully amortize the balance for an additional 40 years. 223(f)s loans are fixed for 35 years and subject to the remaining economic life of the property

*An existing multi-family building (with say, 200 doors) that needs a lot of rehab occupancy and stabilitization would be a candidate for a 221(d) loan

*HUD insured debt is cheap because it’s sold essentially as a guaranteed government security

*One of the strengths of a HUD loan is that they’ve got the highest leverage non-recourse, lowest interest rates out there. One caveat is that they take longer and are more expensive to close

*When you have time to decide on a purchase or refinance and you’re not under the gun, it would be irresponsible to not seriously consider 223 at that period if you’re building a multi-family project and not planning against on a merchant build

*If you’re focused on affordability, FHA will start pushing up leverage higher than Fannie or Freddie or CMBS can get close to – and they’re going to underwrite a debt service coverage ratio that’s ultimately going to provide better loan dollars

*Fannie and Freddie both have mandates and can get very aggressive. But when it comes to filling up that capital stack and getting really high leverage and long-time low cost fixed rate debt, especially for affordability products, FHA is a wonderful option

*When it comes to qualification for an FHA loan, much is at the discretion of both the lender and the HUD office, particularly in the case of 221(d) for insuring debt. A good rule of thumb remains the standard net worth in liquidity.

*As with more conventional loans, a borrower needs to show personal credit and a balance sheet sufficient to satisfy the lender. But this is not a bank debt, so they don’t care about personal tax returns. They want you to be honest but they’re not looking at global cash flow.

*In order to qualify for a non-recourse debt, you have to be a very qualified person.

*Before worrying about going out and getting a partner to help you secure a loan, make sure you are actually not qualified on your own. If you’re seeking financing above $750,000, Blake suggests you work with a well-qualified financial intermediary

*More than 30 percent of Blake’s clients are first time agency borrowers or small balance agency borrowers, borrowing between $750,000 and $7.5 million for existing multi-family product. Janover Ventures helps them get the highest leverage and the lowest rate at the most reasonable cost to close the fastest.

*Janover Ventures offers a short video tutorial series explaining all the products Blake has talked about.

*Even the biggest companies and multi-family investors (10-20,000 units) hire intermediaries and advisers when it comes time for huge portfolio recapitalization and buying and refinancing. Blake mentions this to assure prospective borrowers that it’s okay not to know everything going into the process


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