Fannie Mae’s New Loan-to-Value, Buy a Multifamily Property as an Investor With Just 5% Down With Fred Glick of Arrivva

Fred Glick, a Broker, Real Estate Realist, and Founder of Arrivva, holds a stellar track record with over $2 billion in residential transactions while grounded in a lifelong passion for real estate. Take notes as Fred Glick gives you real estate hacks and tips in Arrivva’s We Fixed Real Estate Podcast where he shares his expertise and insights.

Arrivva is a comprehensive real estate and mortgage brokerage, catering to qualified motivated buyers, sellers, and mortgagees with a commitment to brokering with love, integrity, knowledge, a well-defined plan, and a transparent flat fee structure.

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Here’s a glimpse of what you’ll learn: 

  • Explore the groundbreaking changes in Fannie Mae’s Loan-to-Value (LTV) for multifamily properties
  • Delve into the specifics of Private Mortgage Insurance (PMI) for multifamily units
  • Overview of current interest rates, and the challenges faced by home buyers and sellers in a market with varying interest rates
  • The duo explores the 2-1 buydown strategy, breaking down how it works and its potential benefits for buyers
  • Discussion on using rebates as a hidden incentive in real estate transactions, and connecting rebates with the 2-1 buydown strategy and the flexibility it offers

In this episode with Fred Glick

Join us in this insightful episode as Drew Thomas Hendricks, from Nimbletoad Marketing, turns the tables and interviews Fred Glick, a Broker, Real Estate Realist, and the Founder of Arrivva. Dip your toes in the world of real estate and investment strategies and join this interesting discussion about the game-changing updates in Fannie Mae’s Loan-to-Value (LTV) ratios for multifamily properties. 

Discover an interesting way to invest in a four-unit property with just a 5 percent down payment, explore the implications of private mortgage insurance (PMI), and learn about the 2-1 buydown strategy to navigate interest rate challenges. Whether you’re a prospective buyer, seller, or an investor, this episode provides valuable insights into maximizing opportunities and overcoming challenges in the ever-evolving real estate market.


[00:00:00] Drew Thomas Hendricks: Drew Hendricks here, flipping the script. René is on vacation and weirdly, I am taking over.

[00:00:06] Fred Glick: He’s actually studying for the broker’s exam.

[00:00:08] Drew Thomas Hendricks: Oh, that’s right. That’s right. I thought he was having fun. Anyhow, I am, he is probably having fun. I mean, what could be more fun than studying for the broker’s exam?

[00:00:19] Fred Glick: Totally.

[00:00:21] Drew Thomas Hendricks: Drew Hendricks here. I am sitting in for René. This is We Fixed Real Estate. We’ve got Fred Glick on the line here, the host of the show, but man, that is why I don’t normally do this, but we’re going to, we’re, we’re doing this unfiltered here. So today we’re talking about Fannie Mae and the New Loan-To-Value.

[00:00:44] Fred Glick: Yeah. For multifamily. This is freaking huge, hugely. So, if you want to buy a, I’m going to use the California example to make my point. If you wanted to buy a four-unit property of which you were going to occupy one of the units and rent out the other three. Right now today, you would have to put at least 20 percent down. Fannie Mae changed that where you only need to put five percent down. So, on a million dollars you put fifty thousand dollars down which can be 100 percent gift.

Okay, which is amazing. And then be able to buy the place. I think, oh, so look at the, I’m sorry, the four-unit was 75%. So you had to put 25 percent down. Now you only need 5 percent down. So, anywhere two to four units, you can now put 5 percent down. But here’s the negative. The negative is you’re gonna have that private mortgage insurance.

Nobody knows what the prices for the private mortgage insurance are gonna be, so believe me, it’s going to be an expensive interest rate. It’s not the same. It’s a single family. There’s gonna be premiums added on to the rate and to the PMI, but if the numbers work, the numbers work instead of buying a single house and having a 2, 000 payment, you can buy a four-unit and have a 500 payment because everybody else is making the payment for you.

[00:02:24] Drew Thomas Hendricks: You know, as long as the other renters can do the cash flow, you’re

[00:02:27] Fred Glick: Exactly. So you’ve got to take a look at all, all the numbers now. FHA has kind of been doing this up to 96 and a half percent, but they’ve had this really expensive mortgage insurance. Plus they have harder guidelines for the property.

[00:02:45] Drew Thomas Hendricks: Like expensive mortgage insurance. I’m only familiar with single-family homes. What would PMI be for a multifamily unit?

[00:02:51] Fred Glick: We don’t know. That’s what I was just saying. They hadn’t missed the prices. Things and the PMI companies haven’t sent it out. So that’s the come in the future a little bit. But as I was saying the VA you can even do the hundred percent on a four-unit property. So, if you an entitlement, they don’t care what kind of property you buy so that’s kind of been around. It’s a tough loan to do because VA can be a little tough with property and some other weird stuff and they have that, the VA funding fee, which is expensive, but it is what it is.

It’s financed in, that’s good news. So, there are ways now it’s going to open up more stuff for people, to be able to buy the multifamilies. That’s the good news.

Okay, so here’s the situation of why this is not as good as it seems. I’m always going to give you the worst case scenarios. That’s just me. There’s investors who buy multi-families. Now there’s going to be owner-occupants. So, I, so you can see there, you know, there’s just going to be more demand. So I would say go into this, if you’re going to do it as soon as possible, just to make sure everybody doesn’t find out about it.

So, yeah, interest rates suck right now. They’re high. They will be coming down. It’s may take two years. You know, if there’s work now, it’s going to work even better later. And then there’s going to be more buyers because there’s going to be more people who qualify. So that’s the other edge of this sword. So,

[00:04:28] Drew Thomas Hendricks: Well, let’s talk about interest rates for a second, because you did mention that, that they’re coming down, but they’re still high. They’re hovering just under eight right now. What does a home buyer, a prospective buyer do? Or even a seller who to sell out of their home at a 2. 75 interest rate and have to go into a home at an eight.

[00:04:46] Fred Glick: Well, the sellers, it’s a case-by-case basis, but you know, if you like where you live, you got a good rate, stay. Up to them. I can’t, I can’t change anybody’s mind with that. You know, look at the numbers and it makes sense for you. Makes sense for you.

But you might say, “Hey, I’m tired of where I want to live. I need to move. I’m out of here. I only need one bedroom. I don’t need seven. You know, it’s expensive for me to have it.” You know, you’re going to go regardless of the rates, especially when you’re buying down.

But for homebuyers, here’s the story. We’re in what’s called the inverted curve. What does that mean? Well, these short-term rates three months six months one year three-year treasuries are higher rates than the 10-year and the 30-year which are called the long bonds long treasures so there’s nobody’s really got adjustable rate mortgages out there to offer even though fixed rates are high.

Yes. There’s some credit unions that may have it, you can check, but they’re usually just pain to deal with and take too long. But you know, for vanilla fixed rate, you know, I think it was like 6. 99. I saw the other day, we’ll just, we’ll just use 7 percent to make this sample easy. So that would cost no points.

So in seesaw method, you could get a six or seven at no, you get six and a half, but you’re going to pay three points to get it and just making up numbers. So if you wanted to do that, you could get a lower fixed rate, pay the points, even maybe negotiate the stellar to pay the points. If there’s nobody else negotiating, get you.

But as long as that’s the same, they shouldn’t care. The tech, the points are totally a hundred percent tax deductible for a primary residence in the year you buy the property, even if the seller pays, which is really cool, free money. Or you can do what’s called a 2-1 buydown.

You’ve probably heard this. So at that 7% rate, what they’ll say is we’ll give you 5% for the first year, 6% for the second year, and then from seven three through 30, your three through 30, you get 7%. Good news is, let’s say you get the seller to pay the points, you get the lower payment for the first couple of years, two, three years from now, the rate’s going to drop, you refinance it, you’re out of it.

No harm, no foul.

[00:07:03] Drew Thomas Hendricks: 2-1 buydown, but that’s good. Now, can people use the rebates for the, so that there’s like a little hidden incentive there, you’ve got the rebates, you got the, I’m just thinking here, you got the rebates and then you’ve got the buy down and you’re buying these points with the rebates.

And then those. Buying down those points is a hundred percent tax deductible.

[00:07:26] Fred Glick: 100 percent true. You got to correct. And you’re a layman in this, which is good. So yeah, use the rebate to get the, a lower rate for the entire term or use it for the 2-1 buydown, or use it for whatever we don’t care and it’s not taxable to you. You just adjust your basis for your capital gains. So,

[00:07:48] Drew Thomas Hendricks: That’s fantastic. Yeah. Well, as we’re wrapping down this takeover episode, Fred, what’s the good word?

[00:07:57] Fred Glick: Good word is I’m in Philadelphia. And it’s like in the sixties in November, that’s a good word. Yeah, exactly. So I’m sitting outside, which is I normally don’t normally frozen by now. So good weather here on the East Coast, at least for the next couple of days.

[00:08:16] Drew Thomas Hendricks: And I’m back in California and we fight, we’re finally getting actually like fall weather.

We finally have the same. So the surf’s winds blowing offshore surf’s good. We had a really, it was just foggy as heck all through, all through October.

[00:08:33] Fred Glick: Yeah. The surf’s been terrible in LA area. It’s just nothing.

[00:08:40] Drew Thomas Hendricks: We’re in the sweet spot now. I was out yesterday. It was great.

[00:08:45] Fred Glick: Cool. We’ll do the surf report too. Next time.

[00:08:47] Drew Thomas Hendricks: Yeah. Right now it’s two to three offshore. Nice. Nice. Well, Fred, you go back and enjoy Philadelphia and until next time, this is We Fixed Real Estate.

[00:08:59] Fred Glick: Cheers.

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