Friday, February 22, 2019

Are Fannie Mae's Subsidized Arizona Commercial Real Estate Loans a Win-Win?

Fannie Mae recently began offering subsidized Arizona commercial real estate loans to property investors. Like any government program, there's a catch. If you take out a loan under this plan, half of all the units in your apartment complex must be priced for the "lower middle class. You'll have to cap rents on 80% of your units. You might be wondering why you'd want to do something like that.

Rent caps could be coming to a neighborhood near you whether you like it or not. If you follow Fannie's guidelines, you'll get funding for up to 90% of your next property at a minuscule interest rate. This means you can secure your next apartment for next to nothing if you agree to earn next to nothing going forward.

Already across the country, local politicians are making vague speeches, full of mythical "teachers and firefighters who need affordable housing." Local politicians, with eyes toward the distant future, are intent on stopping the supposedly rampant rent increases.

The implication? You might be legally obligated to offer subsidized housing in the not too distant future. You might want to consider taking advantage of the Fannie program sooner rather than later.

Because more localities are mandating subsidized housing, maybe Fannie’s subsidized Arizona commercial real estate loans are a good idea.

It might be in your best interest to cap rents preemptively on your next investment property and board the subsidy train.

In the worst case scenario, you might purchase a shiny, class-A high rise with an expensive loan, under the presumption of rising rents. If city council erases your profit projections and restricts the amount of rent you can charge per unit, you’re out of luck. Who knows, you might default as a result of their new mandate.

In politics, you know that the ends justify the means. Local politicians need to play their part as middle-class champions, and if rent controls lend credence to their act, don't expect them to hold back. Sp, you never know if rent controls are coming.

But, what if rent controls don't come?

Taking advantage of subsidized Arizona commercial real estate loans could cost you.

If you check the political headwinds and determine that rent caps are a foregone conclusion, taking out a subsidized loan on your next investment property might be a good idea.

But what if there’s a change in the agenda? Say the city councilors decide they should let the market determine rent, causing rent to skyrocket. Taking advantage of the Fannie program means you won't be able to charge based on the market rate. As your fellow landlords enjoy rising profits, all you get is a lower mortgage payment. In the end, you want to make money, and preemptively limiting the amount of money you can make on your next investment property might not be in your best interest.

Then again, it could be a good idea. Taking advantage of Fannie Mae's program is a matter of your own discretion. Maybe you could decide by flipping a coin?

Dennis Dahlber Broker Ri CEO Level 4 Funding LLCDennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
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Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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