When insurance doubles, your net operating income drops by the same amount, and the loan you had in mind shrinks with it. This loan is built to keep proceeds closer to where they were.
In Florida and along the Gulf Coast, apartment insurance premiums have doubled and tripled in a few years. Every dollar of premium comes straight off your net operating income, and on an amortizing loan, an $80,000 jump in insurance can cut what the building supports by about $800,000. That's often the gap between refinancing cleanly and bringing cash to closing.
An interest-only payment leaves more room for the higher premium, so the same income supports more loan. On select loans, insurance and taxes are handled with a holdback at closing instead of a monthly escrow, which keeps more cash in your operating account through the year.
On apartment buildings in high insurance markets, loan amounts typically range from $500,000 to $20 million and above. Maximum LTV is typically 75%.
These are typical ranges, not a quote. Your rate and loan amount depend on the property, your credit, and the market.
These are typical terms. Yours depend on the building, the market, occupancy, and the term you choose.
Buildings within reach of the coast where wind coverage drives the premium.
Even buildings far from the water have seen premiums climb.
Alabama, Mississippi, Louisiana, and Texas markets with named-storm exposure.
The old loan was written on the old premium.
Roof age and building systems that push premiums higher.
New coverage with a higher deductible and a lower premium.
The building: 52 units in Florida, appraised around $7.4 million. Insurance went from about $95,000 to $175,000 a year, cutting net operating income from about $520,000 to $440,000.
The problem: A $4.85 million loan maturing. On a 30 year amortization, the building now supported about $4.4 million, so the owner was looking at bringing close to $600,000 to close.
The loan: Qualified on the interest-only payment: about $5.0 million.
The result: The maturing loan paid off and closing costs covered, with little or no cash from the owner.
Illustrative figures, rounded. Your terms depend on the building, the market, and the loan.
For owners whose building runs well but whose insurance bill doesn't care.
Refinance without the premium jump forcing you to bring cash.
The interest-only payment leaves more room for the insurance line.
On select loans, a holdback at closing replaces monthly escrows.
Know how insurance and the post-sale tax reassessment affect the loan before you sign the contract.
What you own, what's owed on it, and what you want the loan to do. A rent roll and T-12 are all it takes to start.
The loan amount, the structure, and the cash to or from you at closing, before you pay for an appraisal.
Appraisal, environmental, title, and insurance get ordered and kept on schedule. You always know what's left before closing.
Loan documents signed, the old loan paid off, and the rest wired to you.
Send the rent roll, T-12, and your current premium, and we'll come back with terms.
