I am a student looking into multifamily investment, and I have a question about disposition. I have heard that a bank will normalize certain financial aspects of the property, such as as turnover rates to determine what a "normal" income stream would be for that property. First of all, is that true, and second, what items does the bank normalize?
David,
As a commercial mortgage broker/banker... all banks, lenders, Fannie Mae, Freddie Mac, CMBS, Life Cos. all have their own method of addressing this issue. Typically there is a Market Vacancy deduction from the Gross Rents to get to EGI, then look at Trailing 3, 12 Months and average the turnover. The stronger the market, and the stronger the borrower will get the more aggressive NOI. No one lender or even underwriter at the same lender will arrive at the same NOI.
That is why borrowers need to find a good mortgage broker like say me for example as we will argue or should I say gently pursuade the lender to see things our way AND we are a hand that feeds them with multiple loans, not just a one off deal AKA leverage. LOL Good luck with the studies and look us up when you graduate. I can point you to our hiring manager who may be in need of Analysts.
