2022 Legal / Financial Update
Probably time for ANOTHER legal/financial update based on what I am seeing in the law practice as well as out there in the markets!
Sometimes the obvious, is not so obvious....
- Probably NOT a good idea to close without having your CapEx raised 😖
- If you are not meeting your DCSR requirements in loans docs, please contact your lender. Let your lender/PE know that your cashflow is getting reduced (i.e., debt service, property taxes, insurance increases...). Ignoring debt/PE will simply piss of your largest and cheapest source of capital and show them that you do not know how to asset manage. 😖
- Fight your tax assessments. If you can provide comps of increased cap rates (since the Fed's interest rate hikes), you can show a decreased value (at least on paper). 😖
- Require your property management company(ies) to utilize a company like Rhino+ for security deposits. This can dramatically reduce your delinquent receivables (especially right now) 😖
- Communicate monthly with your investors/limited partners as to the property's KPIs (good and/or bad). Communication is ALWAYS the best way to reduce tensions created from unknowns or from staring at media outlets talking about economic doom and gloom 😖
- If you are a KP on a project, you may have the same liability as the GP/Sponsors. You HAVE to be actively in contact with your sponsors to understand what is going on with your property (yes, we have seen KPs held to the same liability requirements as the sponsors). Hint, hint - NEVER EVER become a KP without some compensation or upside (legally drafted and disclosed...of course). 😖
- You BETTER have weekly calls with your PM company as to the 40-50 KPIs (key performance indicators) establishing the health of your asset. What is going on for marketing? Vacant Readies? Traffic count through the leasing office? Work orders over 3 days old? Constantly survey the market/competition for comps/incentives. 😖
- Finally, STOP PUTTING HARD MONEY DOWN DAY 1, if you do not know or understand how to effectively underwrite an asset in an increasingly challenging debt environment with our government trying to curb inflation (rent is part of that). You HAVE to fully underwrite, talk to your debt broker, insurance company, anticipated PM company and tax consultant before making an offer with any type of hard money down. OTHERWISE, that is a give to the seller. 😖
💡💡If you are running into any debt/PE issues based on performance and need to see what you may or may not be able to do, feel free to reach out to www.kaliserlaw.com.
#2022LegalTips #multifamilyrealestate #multifamilyinvesting #multifamilysyndication #defaults #youcannotfixstupid
