Alison Williams 0:00
And one thing to point out, you know, our requirements are obviously going to be a little bit different than maybe a bank. And that’s because the lending that we do is all non recourse. So you know, you are not actually signing any personal guarantees. There’s no contingent liabilities on somebody’s balance sheet, which is extremely important, particularly if they decide to go and build another property, you know, because that is something that lenders look at in terms of credit and financial strength. So everything that we’re focused on is strictly based off of the property’s performance. And then we supplement that with the borrower’s experience. And obviously meeting you know, minimum net worth liquidity requirements.
Ana Ramos 0:37
And you know, what you just reminded me like one of the biggest things that I hear a lot of and I did close a portfolio recently, the borrower refuses to provide tax returns, most banks require tax returns. And on the agency side, we don’t require that for qualified qualifications. So we do ask for Financials, real estate schedule, bank statements, but we don’t require tax returns. And I think that’s a big plus for a lot of borrowers.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you are an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.
J Darrin Gross 1:22
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today, my guests are Alison Williams and Anna Ramos. Allison is the Senior Vice President and Chief Production Officer at Walker Dunlop. And Anna is a managing director for the West Coast and mountain regions. And in just a minute, we’re going to speak with Allison and Anna, about commercial lending strategies for multifamily.
But first a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see i tractive Our guests are Be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, we encourage you to subscribe. With that I want to welcome my guest, Alison Williams and Ana Ramos. Welcome to CRE PN Radio.
Alison Williams 2:43
Thank you for having us.
Ana Ramos 2:45
J Darrin Gross 2:46
Well, I’m really looking forward to our conversation today. Before we get started, if you guys could take a second and share with the listeners a little bit about your background.
Alison Williams 2:56
Absolutely. I’ll start so as Darrin mentioned, I’m Alison Williams and Senior Vice President and Chief Production Officer at Walker & Dunlop. I oversee the small balance lending department where we focus on smaller multifamily assets, usually loan sizes ranging from one to 15 million. I’ve got a team of seasoned professionals scattering coast to coast and Ana Ramos is one of our best and talented individuals out in the west coast and mountain region. And I’ll kick it over to Ana.
Thank you, Alison. Hi. And I am Ana Ramos. I’m a managing director here at Walker and Dunlop. And like we discussed I oversee the Western mountain region. I have currently a team of five and we’re here to definitely boost up the small loan production over the entire West.
J Darrin Gross 3:47
Got it? Yeah. Well, I’m excited. I’m excited to have our conversation and have a chance to talk with you guys today. The I guess the first question I’d have is Walker Dunlop. Are you guys a direct lender? Or do you go through mortgage brokers or not merge mergers but commercial real estate brokers?
Alison Williams 4:12
So I like to think of us as the best secret out there. So we actually are direct lenders. We were founded in 1937 and then went public in 2010. But we were actually one of the very first Fannie Mae approved just lenders that started back in 1988. So we are a direct lender for Freddie Mac and Fannie Mae and we also have our own proprietary lending programs. So if you know if there is a borrower out there that’s looking for direct financing or a broker that’s actually looking to access the direct lender than than we are that group. You know, historically, we’ve been top number one with Fannie Mae seven out of the last 10 years, and we are consistently a top five Freddie Mac lender and a top three husband are so dominantly playing in the multifamily lending space, just to kind of give you an idea of our scale and size in 2021, our company, you know, financed and sold over $68 billion in in commercial real estate assets, and the primary focus has always been multifamily.
J Darrin Gross 5:21
Got I was gonna ask you if it was limited or focused strictly on the multifamily or if you were across all asset classes, but
Alison Williams 5:31
We are we are across all asset classes. So we do anything that’s income, cash flowing or construction, that will be you know, cash flowing assets. So retail, hospitality, industrial office, self storage multifamily, but predominantly, our team when you look at, you know, the individuals in our origination, you know, they are truly focused on the multifamily space.
J Darrin Gross 5:54
Got it? In in in that I’m kind of curious, you know, the way the I was having a conversation with somebody the other day, and we got to the point of some of the pricing is getting hurt has been right, all until rates are starting to creep up, we’ll see what happens. But, but the price per door was getting so costly that look like the the construction, you know, option was looking more and more attractive. Are you finding that construction? Lending? Is? Is his or increased interest in that? Or is that that always been kind of steady out of your can? Yeah, yeah,
Alison Williams 6:33
I mean, I think construction lending, I’ve actually been probably it’s been more difficult actually. Because the in order to find vacant land, right, or repurpose land that’s extremely difficult and prime, you know, locations. So I think that becomes more challenging as cities and other areas get built out. And then obviously, with the rising cost of construction coupled with supply issues, we’re actually seeing more people hit pause on construction than ever before. And I think that they find that they can actually go buy an existing asset below replacement cost, and then do some type of value add and immediately add value to that property. And they don’t have to wait, you know, two to three years to actually have it built.
J Darrin Gross 7:18
Yeah, no, it’s always made more sense to me as if you can buy it for less than it cost to build. That’s, that’s a good option. I think Sam Zell, Sam Zell had that idea that was good. So Fannie and Freddie. In a small balance, you said under 15 million small balances at the range, kinda from one to 15 is where you guys define small balance.
Ana Ramos 7:48
Freddie Mac defines small and up to seven and a half, and Fannie Mae defines it up to 6 million.
Alison Williams 7:55
And then we have a proprietary program that goes up to 15. So what we find is that, you know, most of our clients that play and, and I use the to term loosely, small, smaller multifamily assets, typically are in you know, one to 20 million is kind of the asset valuation that they’re targeting. So it was really important that Walker and Dunlop for us to be able to serve, you know, basically all of those areas. So that’s why we we ended up rolling out a newly launched proprietary platform that could take us up to 15 million to make sure that we’re meeting the needs of the clients.
J Darrin Gross 8:26
Gotcha. No, I was surprised or not surprised. I guess, as you see, the values continue to increase. You know, what used to fit in the box doesn’t fit in the box anymore. And, you know, if there’s gotta be some sort of adjustment to the market, or to the platforms that are in play to make it still work, that’s good. Well, so let’s talk a little bit about, you know, the the the lender, the borrower lender relationship, and what you guys are looking for for or to lend on?
Ana Ramos 9:06
Yeah, I would say I’ll take it Alison, I would say on the Small Loan Borrower, typically the requirements that we look for minimum FICO score is 680. Or better than net worth, we’d like the net worth to equal the loan amount or greater and liquidity, we do ask for nine months of principal and interest payments of the existing loan that we’re about to refinance. And we also are looking for some type of multifamily experience, one year to two years is something that we really need to get comfortable depending whether it’s Fannie or Freddie to have at least that background and multifamily for the borrower to qualify, typically, we’d like for them to be local, but if they’re not local, we do ask for a third party management if they’re considered absentee, which is greater than 100 miles of the subject property.
Alison Williams 9:51
Yeah, and one thing to point out, you know, our requirements are obviously going to be a little bit different than maybe a bank and that’s because the lending that we do is all non recourse. So you You know, you’re not actually signing any personal guarantees. There’s no contingent liabilities on somebody’s balance sheet, which is extremely important, particularly if they decide to go and build another property, you know, because that is something that lenders look at in terms of credit and financial strength. So everything that we’re focused on is strictly based off of the property’s performance. And then we supplement that with the borrowers experience. And obviously meeting, you know, minimum net worth liquidity requirements.
Ana Ramos 10:28
And you know, what you just reminded me, Aly, one of the biggest things that I hear a lot of and I did close a portfolio recently, the borrower refuses to provide tax returns, most banks require tax returns. And on the agency side, we don’t require that for qualified qualifications. So we do ask for Financials, real estate schedule, bank statements, but we don’t require tax returns. And I think that’s a big plus for a lot of borrowers.
Alison Williams 10:55
J Darrin Gross 10:56
Yeah. No, there’s a couple things that you said there that I hadn’t heard, I’d always heard, you know, non recourse was always like a preferred option, if you could get it based on you know, if things blew up, and there was some sort of a something unless you were committing fraud or something like that, that you weren’t necessarily on the hook. But for you to frame it in as much as that it improves your balance sheet to where if you’re going to develop another property or something. I mean, it sounds like that’s really probably the the real benefit of of having a non recourse loan there.
Alison Williams 11:29
Yeah, it’s definitely I mean, I think as people begin to scale and grow portfolios, they start to see, you know, the value and doing just non recourse loans, you know, not only from a liability standpoint, but also being able to give them access to more capital, and to be able to actually scale quickly. You know, like, as I mentioned, banks really are focusing on your contingent liabilities, what is your overall debt ratios look like? We don’t get into that we’re really just underlying valuing the property itself, and making sure that we’re comfortable with the cash flow that the property produces to meet our mortgage payments.
J Darrin Gross 12:05
And what kind of a cover ratio do you guys require with a debt debt service coverage ratio?
Ana Ramos 12:12
Typically are, you know, in larger markets, or minimum debt coverage ratio is 1.20? If not, across other markets were at 1.25.
Alison Williams 12:21
Now that’s up to an 80% loan to value so 20% down?
J Darrin Gross 12:25
Yeah. Okay. And what’s a typical term? Do you guys do interest only? Or is it pretty much?
Ana Ramos 12:33
All the time? Yeah, that’s I think that’s a big thing that differentiates agency with banks is out, banks are really comfortable doing interest on I mean, I’m sorry, fare agencies really comfortable doing interest only full term interest only that we have anything from a five 7 10 15. And we do have longer terms as well as you believe it or not, some clients do want to 30 30 year term, fully amortized. If they want to leave the property to their children never want to touch it. Again, we do have a fully amortizing loan, which is great. On the Fannie Mae side, we do sell that as well. But typically, I always very, is very popular with the non recourse. And cash out, I think that we see a lot of banks that some banks will definitely be aggressive in the pricing, they limit the cash out. For us. I mean, we don’t necessarily we don’t have an issue with cash out if the property is performing and the property is maintained, we don’t have an issue with cash out.
Alison Williams 13:27
Yeah, and that’s, you know, something that we see much a lot more common in the larger space than we do necessarily in a small, but I think it’s something that the borrower should be aware of, I mean, what typically happens in the larger space is somebody acquires a property, they improve it, and then three to five, maybe seven years later, they either sell it, or they actually then refinance it and pull new cash out, you know, immediately right there, and that’s treated as refinance proceeds, so it’s taxed differently. And so that is just immediate, you know, then they can pull proceeds out and then go buy their next asset. And that is really how you scale. So that’s what we typically see our clients do, you know, they’re, you know, but I wouldn’t say that some want to hold long term, obviously, for generational wealth and for estate planning purposes. But I think those that we see scale quickly and pretty large, they’re really improving the property’s creating value and then coming back in for another bite at the apple and that’s what you know, I think is just a really really strong business plan that has proven itself out year after year.
J Darrin Gross 14:30
You know, from experience speed wins and that thing faster you can get it improved and and get those higher rents and get that money back. That’s that’s really the way to do that. That’s good. So let me ask on the cash out refi same lending requirements or ratios and then we go to the 80 80%.
Ana Ramos 14:53
Typically on the cash our 75.
J Darrin Gross 14:56
Okay, and then same on the debt cover, or district
Ana Ramos 14:59
125 to 130 for the cash out. Okay.
J Darrin Gross 15:05
Okay, so that was the, her I guess the balancing act, I guess it changed a little bit there we go from go into go out. So talk about value add, are you able to provide any of the funds for the capital improvements? Or is that still required by the borrower to bring that
Ana Ramos 15:28
In terms of programs, we do have some smaller bridge programs that we that we can apply and see if the property qualifies them, there’s a structure and a plan in terms of what they’re putting in place today. So between our proprietary and some of our bridge capital, we do have some of that starting at least 3 million in loan size, and above that we can consider
Alison Williams 15:51
The agency’s job. So agencies are really looking for stabilized assets, you know, we have seen where 1031 buyers will come in, and they’ll purchase something, and then they actually want us to do a whole back for, you know, capital improvements, because it actually helps with their 1031 transaction. And so we’ll do that, and then we’ll fund those dollars, you know, as they’re spent. But the program itself isn’t structured to be like a true bridge program, as Anna was mentioning, those are more, you know, debt funds is some regional banks play in that space. And there’s also just some investment firms that play in that space.
J Darrin Gross 16:26
Got it. And when you do that kind of bridge thing, is it kind of like a construction loan anywhere you have a line and you draw it down? Based on the?
Alison Williams 16:35
Yeah, I mean, it’s it basically is an initial funding. So it’s usually, you know, maybe 75% of total cost. So you would do 75% of purchase price, and you would do 100%, hold back for any capital improvements. And then as those improvements are completed, then the borrower basically submits a drawl to take those funds back. And it’s all you know, tied to a set interest rate. But most of those deals are floating rate, typically, when you want to do you know, just as you mentioned, like a construction loan. Right? So construction, lending is always on a floating rate basis, as well. And that’s what we see in the bridge place. It’s also typically, you know, a one to three year term, it’s not a long term, five, seven or 10 year program, like we do with the agencies.
J Darrin Gross 17:18
And then there’s a bridge then do you convert that to permanent financing? Or are
Alison Williams 17:24
You do you refinance out?
J Darrin Gross 17:26
Okay, just refinance. Gotcha, gotcha. All right. So kind of talked about the different types of loans. What, what do you project when you are talking with a borrower as far as closing fees? What kind of closing costs should one expect? Ya know, typically,
Ana Ramos 17:48
I mean, depending on the structure of the transaction, but typically, closings fees will range anywhere between 3500 to 7000, just depending on the structure of the deal. Whether there’s a different borrower structure, more like a tiered structure, it’s a little bit more convoluted, versus straightforward, a single asset. So it’ll depend that anywhere between 35 to 7000. At closing, after the, we do collect an application fee that covers a third party reports, which is the engineering and the appraisal, and then that’s the actual closing fee that goes along with initially also we do have closing fees of UCC searches and Title and Escrow that the borrower does take care of.
J Darrin Gross 18:32
And for borrowers, considering, you know, are looking for financing for a multifamily property, what are some of the most important questions, you think that a borrower should be asking their borrower or their lender?
Ana Ramos 18:52
For me, personally, when I think the borrower and the typical questions that I get is, one, how much cash out do you do? How much do you service? What’s the servicing look like? What’s the timing cost? And obviously, the non recourse, so what are my proceeds that you’re able to do? I was a big one, and especially right now, in today’s environment, the costs and the timing, I think, given where interest rates are, timing is really important. One of the advantages that we have is that, you know, on the Freddie Mac side, we’re able to lock the interest rate at application. So once the borrower signs the application, the interest rate is set, which is really critical and important in today’s environment. On the Fannie Mae side, we can also accommodate an early rate lock, which takes about maybe three weeks, so it’s not as quick but it’s also quick in order to accommodate that. So borrowers are always looking how fast can you lock me? How fast can you close me? What’s it going to cost me primarily in the West Coast? What is it going to take to get it done, but I O is a big factor today. And now we’re able to accommodate.
Alison Williams 19:56
Yeah, Anna touched on to servicing so I think that’s something that people don’t Really think about but we do service all of our loans. That means we collect the mortgage payment, we hold the reserves, we’re the group that’s funding those reserves when you need them. So we’re we kind of view ourselves more as a partner and an advisor and the entire lifespan of the deal, rather than just doing the origination and then tapping out. And so you know, some banks do service their own deals, but some actually out service to another lender, or it might be sold post closing. And that’s just something that Walker and Dunlop does not do. Yeah,
J Darrin Gross 20:31
that’s great. The, that’s my dad was a banker, and I didn’t really understand what he did the borrower borrow money, but that relationship is definitely it’s critical to actually, you know, having the opportunity, I mean, when things do happen to have somebody to contact and be able to, you know, work through and that knows you or has a history, definitely important.
Alison Williams 20:57
I think the other thing, too, it just made me think of something is, you know, right now, obviously, there’s so much market uncertainty as well. And I think the other important piece is people are trying to decide which financial advisor they’re going to use to, you know, you know, finance their next deal, because they need to think about how often are they in the market? And what is their access to capital. And well, we are a dominant Freddie Mac and Fannie Mae lender, you know, last year, we closed with over 300 Different capital sources. So I think making sure you pick the right partner that actually understands the landscape, and also sees how the markets move very quickly, and you’ve got to react fast, and you’ve got to have a lot of windy relationships to make sure you get, you know, the best structure in terms for your client. So just making sure that you pick the right partner, particularly in some times that we’re in right now, where it’s a little bit uncertain.
J Darrin Gross 21:46
I was gonna ask you, you mentioned, her, again, had mentioned the questions that a borrower should ask, what what kind of timeline should one expect to you know it from application to? Presuming all of the information, you know, comes in as you need it, but is there is there a realistic timeframe that you can use,
Ana Ramos 22:13
it’s very realistic to say, 50 to 60 days, if we were going on the Fannie Mae side, and it’s an acquisition, and we control more of the process, just because of the model being a little more delegated to us. We can do something in 45 days, so just depending, but I would say average 60, but anything sooner that we can accommodate on a case by case and how quickly the bar does provide the information.
J Darrin Gross 22:38
So, Walker Dunlop, you guys are direct. How would you compare direct lender to a broker?
Ana Ramos 22:50
Well, that’s easy. The broker? I think we have? That’s a really good question. Because I do work with a lot of brokers myself, given my previous history, and where I came from, I do have a lot of relationships with brokers. But what I find here being at Walker is that, although we are definitely a direct lender, and our ratio is really high as direct business, we do have a lot of capital resources, a lot of capital available, because we do work with life companies, banks, with other institutions that were able to facilitate and help borrowers and direct them to the right structure and the right lending opportunity in order to get their loans done. So we are a direct lender, but we also have that capital resource. And like I said, I have experienced that I do have a lot of clients that are brokers, and we’re able to work with them as well, because we do work with brokers, and we’re able to structure deals and maintain that relationship as well.
Alison Williams 23:45
Yeah, I mean, I think the other biggest differences, obviously, when when we’re the direct lender, it’s our credit team. It’s our underwriting team that’s actually underwriting the deal and improving it. And when you’re a broker, you’re basically relying you’re the intermediary, so you’re relying on your communication with a group like us, that then is communicating with credit. So you know, you’re just one step removed. And like Anna said, we value our broker relationships are very important to us, you know, we we honor them, we pay referral fees, etc. Because we love that business. But you know, we predominantly are a direct lender, we have a lot of direct relationships, because they know that the individual they’re talking with, ultimately is a part of the group that’s making the ultimate decision.
J Darrin Gross 24:30
And as far as like a borrower that’s, you know, in the market for a property. We talked about, you know, from application to close, any recommendations for establishing a relationship with you guys for you know, Hawker Dunlop before they’re ready to make an application has a good, good rule of thumb as far as you know, getting in touch with you guys before that.
Ana Ramos 24:57
I would say yes. Today actually, we do see a lot of referral business a lot of from our quote app right now that we’re marketing and it’s on our website. So even if today what’s what’s great about the the regional model, what we have today at Walker and Dunlop is that, even if a borrower does not qualify today, we maintain contact with them, we continue to continue the marketing. And we’re also giving them guidance of if you don’t qualify today, or that or the deal doesn’t fit the box today, here’s what needs to happen in order to fit the model or to fit the box. And also for the borrower. What we do see a lot of is maybe lack of multifamily experience. So we encourage them to go and get a bank loan or credit union loan, get that first spend about a year or two, then come back to us. So we stay in contact with them in order to help them get ready for agency takeout.
Alison Williams 25:53
Yeah, but you can’t start that process too soon. I think a lot of times borrowers come to us when they’ve already signed a contract. And they’ve already said, you know, we’re gonna close in 45 days or you know, they’ve, they based it on a loan that they just thought it was going to be 25% down, because that’s how they financed their last, you know, home loan or second vacation property. And it’s just a very, very different dynamic and the non recourse lending. And so I always tell all of our clients come to us early, let’s have discussions, let us know what you’re bidding on, you know, what markets you’re in, depending on what market you’re in, it could change how competitive a lender might be. So, you know, we don’t get paid until the deal closes, we were, you know, for free consultant on the front end, reach out talk to us will guide you in terms of what we’re seeing in the market, what to expect how to underwrite the deal. And then as Anna mentioned, and I’ll share it with you here later, but we do have an online quota that actually allows borrowers to put in property specific information, including net operating income, and then it actually will tell the borrower what kind of loan they can get with very specific loan amounts and interest rates based on those assumptions. So that tool is there at all times, if they didn’t want to talk to somebody, but if they actually want to reach out and have communication with one of our bankers, you know, we can we can make that introduction as well.
J Darrin Gross 27:15
That’s nice to have the tool I find, though, that if you’re going if you’re really going to be serious, you got to have that conversation with the person that’s gonna give you the thumbs up or thumbs down kind of thing. So, but a nice to have the tool. I mean, I would think that, you know, to give you some sort of, of a budget process, or you know, some for an idea, do you ever engage or provide, like a pre approval letter that somebody can? I mean, depending on the market, I’ve seen, you know, that can be a something that tips the seller to consider you as opposed to the other guy who’s offering more that, that hasn’t been approved kind of thing.
Alison Williams 27:55
Yeah, I mean, well, we see. So obviously, the financing is contingent on the property’s performance, right. So if we’re going to put out a soft quote, you know, and actually provide that debt grid, it’s, it’s all based on the property that they’re actually acquiring. And we’ve already received financials, you know, a trailing 12 income and expense statement and a rent roll. And just with those two pieces of information, we can tell you exactly where we think the loan with shakeout, and we’re happy to provide that, you know, in a form that can be shared with a potential seller, but it’s not per se, like a pre approval that you would see in the single family world where you’re just approved for whatever loan amount based on your personal assets and income.
J Darrin Gross 28:33
Right now, I mean, commercial is obviously going to be tied to the property, but just I’ve just seen that, you know, give the edge to the to the one that is that has a relationship already with a banker, as opposed to the one that hasn’t. Yeah, so that’s good. So let’s talk about current market today is we are recording this on May 18 22. Rates, what do you what’s your crystal ball? Or what are your expectations with rates throughout the balance of 20 tail?
Alison Williams 29:10
So I’d say we’re gonna, I feel like we’re in a much better place today than we were 30 or 60 days ago, 30 to 60 days ago, we saw a lot more movement and the Treasury indexes, which is how we base our loan amounts, we base it over the five, seven or 10 year Treasury yield, and we started to see some normalcy in those. So we’re hovering the three tenure Treasury is hovering around 3%. It’s pretty much been, you know, plus or minus 10 basis points of that for the last 30 days. But prior to that, I mean, it jumped 100 basis points from December, you know, today, so we had a lot of uncertainty and a lot of, you know, just feelings of, you know, concern obviously in the beginning of the year, but I think we’re finally at the point where, you know, we can size appropriately we don’t feel like our loan receipts are going to change dramatically, we’re finding more borrowers are coming back in that were, you know, kind of putting their deals on pause and sitting on the sidelines, I think they, for them, it’s just managing expectations, if they can manage their expectation they want to be in the market. But when you see market movements as wide swings, as we were seeing in March, it was really hard to do. So I feel I feel much better today about where we are than I do 60 days ago, I think short term interest rates. So So for LIBOR prime obviously, is going to continue to increase. And that’s just based on where inflation is and what the Feds gonna have to do in order to combat that. But I think in terms of, you know, longer term interest rates, I think we’re in a pretty good spot, we’ll probably see a little bit of uptick, but I don’t know how great that will be. But we’re starting to see a little bit of settling in that area.
J Darrin Gross 30:52
Any sense of just the multifamily marketplace. You know, looking forward to the next 12 months.
Alison Williams 31:00
I mean, last year was huge. So just in small multifamily alone, the asset valuations went up 15% year over year, and then our debt originations went up 47%. So, in 2021, was $85 billion of financing for small multifamily assets in the US, which is just, you know, just insane. The entire multifamily market was 470 billion. So you can just see, you know, how big of a piece of the pie the small multifamily market is. And, you know, I think the forecast going forward, we haven’t really seen that much of a slowdown, as I mentioned, there was a couple people, you know, of our clients that were kind of on pause for 30 to 60 days, but it seems pretty normal again. So I think as long as we can continue to see rent increases, but that has to be justified by wage growth. And so in my mind, I go back to wage growth, what markets are we seeing wage growth, then where are we seeing corporate relocations? If we can kind of track those areas? I think we’re gonna see a lot of activity, just kind of following those pockets.
J Darrin Gross 32:09
Jobs, jobs, jobs,
Alison Williams 32:11
jobs. Absolutely. And wages.
J Darrin Gross 32:14
Exactly. Doesn’t pay enough? isn’t good enough?
Alison Williams 32:19
Yeah, absolutely. So,
J Darrin Gross 32:20
Got it. Hey, guys, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker and try and work with my clients to assess risk, and determine what to do with the risk. And there’s three strategies we typically consider, we first look to see if there’s a way we can avoid the risk. When that’s not an option, then we look to see if there’s a way we can minimize the risk. And when we cannot avoid nor minimize the risk, then we look to see if we can transfer the risk. And that’s what an insurance policy is. And as such, I like to ask my guests if they can look at their own situation. Could be your clients, investors, tenants, the market interest rates, political, however you choose to frame the question. But if you can take a look at your situation, and identify what you consider to be the biggest risk. And again, for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Alison Williams, and Ana Ramos, what is the biggest risk?
Alison Williams 33:35
Anna, do you want to start?
Ana Ramos 33:36
Yeah, you know, it’s interesting, because I think there’s a lot of risk in what we do. And I think I’m pretty aggressive. I think we underwrite our loans pretty well, we’re at a 125 120 debt cover over breakeven. Yes, we are a non recourse loan, but we vet it out the client. So when I assess risk, I’m looking at risk. It’s more for the borrower, the risk of capturing the rate in today’s environment, I the way we underwrite the way we get our values, the way we package the file. I think the agency when you look at agency, historically, our losses are very minor. So if being as in on the origination side, I would love to be much more aggressive and see more. But we don’t we don’t see that a lot. So it’s really hard to speak on that, at least for me, because we don’t see a lot of that the losses are there. They’re unheard of. And it’s very, very small. Just because of the way everything is packaged and the way everything is the way we underwrite the transaction, the property the sponsor, the management and we service the loans and how often we service and how involved we are with the loans from beginning to end and also through the life of the loan. So for me, it would be more the borrower side that today I think it’s really critical, especially in today’s environment is to lock that interest rate because of the risk and the volatility.
Alison Williams 35:08
I’d echo Ana’s comments, but I’ll take a slightly different take. And I think what concerns me the most when I think about today is affordable housing. There’s just a massive demand for affordability right now. And every market with the amount of rent and growth that we’ve seen in every city. I’m currently in Tampa, we had 25%, and rent growth year over year. And we’re just starting to see, you know, just the lack of affordability. And with a lack of vacant land and where you can build and raising, you know, construction costs and rising interest rate, it’s going to become much more challenging to build affordable housing to fit the needs of, you know, the average American. So I think that, to me, is when I think about the future, and my daughter and that kind of stuff, I just think about like, wow, we’ve got to tackle this affordable housing crisis that we’re dealing with right now.
J Darrin Gross 36:01
Ya know, the affordable housing, it’s kind of a Rubik’s Cube kind of thing. And everything keeps going up. And and I don’t know that we’ve got that figured out just yet. But definitely, an ongoing problem doesn’t does not look like it’s going to be solved here soon. So good. Hey, Alison, and Ana, where can the listeners go? If they’d like to learn more connect with you?
Alison Williams 36:27
Perfect. Yeah, you can go to www.Walkerdunlop.com. And then you can toggle over to small balanced loans from there. And we actually have a very in depth website that has a blog post on how to financing guides. It has an entire regional map where our entire team you can get bios and their location. You can also have access or quote up where you can do live sizing of a deal and also see lender term sheets.
J Darrin Gross 36:55
Awesome. Well, Alison, and Ana can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon.
Alison Williams 37:06
I appreciate it. Thank you so much. All right.
J Darrin Gross 37:09
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