Business meeting:
Approve the previous minutes: Joe 1st, Jamie 2nd
Treasurer’s report:
- The current balance in our account is $1,587.16.
- We paid for the rental of the Elks through 2025, as they were nice enough to give us a discount if we paid up front.
- We also paid our $400 annual dues to the Ohio Apartment Association, and all of our website-related costs are paid through next spring.
- Please pay your 2025 dues – $35 for the calendar year, payable by cash/check at a meeting, mail a check to PO Box 221, or use PayPal (paypal.me/findlayfaaa)
- Our membership roles have 142 names on the list, but 29 have been inactive for 4+ years. 59 out of the 142 (42%; or 52% of “active” members) have paid 2025 dues.
Old Business: None
New Business:
From Tom Ross: Monday, May 19, at 9:00 am at the Hilton Garden Inn – the city and county have called a land bank meeting to try and get those to happen. This is the single most important issue for landlords since it would allow them to seize whatever properties they want. They claim there are 5000 eligible properties, but that is not true. It’s a land grab, not a land bank, which will be bad for the community. Please show up to fight against the land bank! 49 out of 88 counties in Ohio have land bank programs; 27-28 of them currently have lawsuits pending for abuse of power with land banks. The greater good is irrelevant for land banks; they can grab the properties for whatever amount they want, and the owner gets nothing.
FYI: The city is talking about eliminating the parking requirement for rentals (2 contiguous spaces per unit). This could be good for landlords.
If you have ideas for speakers for future meetings, contact Jim Staschiak or Katie Erickson (findlayarearentals@gmail.com).
The next meeting is our annual picnic on Tuesday, September 9.
Motion to end the business meeting: Russell 1st, Joe 2nd
Financing Panel Discussion
Joe Mayberry of First National Bank of Pandora
Darrell Baird of Hancock Federal Credit Union
Jim Phares and Trevor Jessee of Civista Bank
Q: Tell us about who you are and your bank.
Darrell: 2 branches in town, $110M in assets, member of a co-op, all account owners have a vote. If it benefits the members, it benefits the credit union. They do 1-4 family residential and some smaller commercial properties.
Joe: 2 branches in town on Trenton & Tiffin. They’ve been in Findlay since 2001, been a bank since 1919. Also, locations in Pandora, Lima, Bluffton, etc. $240M in assets, can write up to about $3.5M in business. Community focused – improving lives through community banking.
Jim: 141st year, based out of Sandusky, 43 branches, closest office to Findlay is BG. Also offices in SE Indiana and Kentucky. $4B in assets. Jim is a commercial lender, focusing on properties and loans that are nonconforming – mixed use, storage units, retail, etc.
Trevor: residential loans at Civista, from single-family to quadplexes, including owner-occupied.
Q: Where do you see interest rates going in the next year?
Trevor: Mortgage rates are based on the 10-year Treasury notes. It’s been on an inverted curve, which makes it hard for investors to predict. High 6’s to low 7’s for investment properties at the moment.
Jim: If I knew, I wouldn’t be sitting here.
Joe: Mid 6’s were possible last fall if credit score, down payment, etc. were good. Now in the last few months, rates have held. Anything in the last 3-4 months has been mid 7’s to low 8’s depending on what you’re looking for with investment properties. If you want to owner occupy, rates are different (usually better) since it’s a home loan and not a commercial loan.
Darrell: Interest rates are a measure of risk, so it’s the bigger picture of relationship, loan to value, cash flow, etc. Our margins are a bit skinnier because they’re a credit union. The spreads on mortgages are near highs. If the regulatory side improves, then that market would get better, which would translate to lower rates.
Joe: When rates fell, lots of buyers locked in at low rates. But they have to go by what the rates are today.
Trevor: There are lots of factors that come into play with cash flows, what rents are, etc. It’s good to talk to multiple people and see what they can do for you.
Q: A lot of investors got a 5-year fixed that is starting to adjust. Are you seeing any challenges with investors getting in trouble with rates adjusting?
Darrell: A common sense approach says that if the numbers work, we might be able to not adjust the rate so high all at once. The alternative is foreclosure, which is not a win for anyone.
Jim: We haven’t seen a significant rise in delinquency, but we have seen rises in rent. They’re staying in line as the rents go up as well, though the consumers have to pay the higher rents.
Joe: I haven’t seen anything about increased delinquencies in their portfolio. A big indicator is Fannie Mae, and we haven’t seen delinquencies in that either. If they’re not late on their personal residences and landlords are still able to find tenants, then things are still going fairly well.
Trevor: The market seems to be pretty even at the moment. There is a shortage of housing for people trying to be first-time homebuyers, so more are living in rentals. Rents have exploded over the past few years, which has evened out with the higher interest rates. Buyers are looking to stay out of variable rates, seeing if there is a different option.
Joe: I’ve heard more concerns about property taxes rather than rates. The bank cannot control insurance rates or property taxes. Many borrowers have paid off mortgages purely because they don’t want to pay flood insurance and such because of skyrocketing prices. It’s a good thing that we haven’t had a natural disaster, but we’re still paying for them for national insurance companies. There’s more concern on the property tax and insurance side of things.
Tom Ross: Insurance costs are at least 20% higher over the last 4 years, both for commercial and residential. We’re constantly needing to reevaluate insurance.
Tom Ross: Right now, it’s a great time to be a landlord. There’s basically nothing for upwardly mobile people to buy; there’s isn’t much in the $125k-$250k range. They’re sitting on great interest rates and don’t want to move. We get to pick the cream of the crop for tenants! A medium-sized 3-bedroom 1-bath house is $1500+ for rent.
Russell Cunningham: The problem is that there are no builders, and no one can afford to build.
Q: Is there a concern of another bubble of foreclosures coming? There are a lot of loans out there that are prime + 1.
Darrell: We don’t really see that coming, because people have been paying their housing first.
Trevor: The economic situation in 2008-09 was very different than where we are today. Today, we have stronger employment numbers, even though wages may not be keeping up with things. Delinquencies are still on one page of a report for us, which is a good indicator that loans are remaining strong. We’re not seeing issues with investors or consumers.
Tom: All housing in Findlay is affordable, we’re actually below the state rates on rent. The problem is our wage gap with so many warehouse jobs. It could be a perfect storm. We need higher wage jobs too.
Q: What debt to income ratio are you looking for with investors? 10 or less units, 10-20 units, or 20-100 units
1.2 for all of them – $1.20 of income to service $1 of debt.
Joe: We’ll rarely right a note if the property isn’t at 1.2. If the borrower is strong and their portfolio supports that, we’ll take a look at it. The property has to cash flow itself.
Darrell: We look at the whole picture – all sources of income and all sources of debt.
Trevor: What’s your gross income to your gross debt? It gets more complicated with more properties. I’m limited to 10 properties, but we go up to 50% debt to income in sellable loans. It used to be 43%, with housing expenses being 20% of that. Now more like 30% of gross income goes to housing. Stronger credit scores and longer established credit histories will go higher, more like 50%.
There are rules for Freddie & Fannie loans – anywhere from 25% to 30%. If you’re holding things in a partnership, that changes the situation with income taxes and such.
Q: What are you looking for with down payments?
Joe: 25% for other real estate
Darrell: 20%
Trevor & Jim: 25%
Jim: That’s not really flexible, though it does somewhat depend on the property.
Q: If you have 10 properties with conventional financing and you move one into an LLC, does that open up the 10th spot?
Trevor: It depends how the notes are written, and whether you write off the interest on a Schedule E or not. Things have gotten more conservative in the last couple of years. We’re getting pushback from some of the larger purchasers of mortgage notes. The larger entities are getting tighter on that.
Q: What is the process and cost for refinancing?
Trevor: $2500-$3500 depending on the property and where the title work is done. The loan size will dictate that. We can roll that into the loan unless you want to pay it out of pocket. A “no cost” refi does have costs, you just pay interest on that when it gets rolled into the loan.
Joe: 1% of the outstanding balance, but it also depends on the rate you want to get. If you’re coming from a different bank, it’s a completely different process than if you’re already financed with us. If it’s a new loan, you’ll have additional fees, but the terms may be more flexible. If it’s in-house already and you want to keep the amortization the same, it’s much simpler. So it depends where the loan sits now.
Jim: New money to the bank is 25 to 50 basis points plus 3rd party costs on the commercial side.
Darrell: Pretty much the same. If you’re in a fixed interest rate period, we can do a modification once during that 5 years.
Q: Do you go up to 75 or 80% for cash out equity?
75% of appraised value, but Darrell can go up to 80% sometimes.
Trevor: Being a good steward of the money you put into the property in renovations will help with getting you more money of equity.
Q: Do you offer lines of credit?
Joe: 75% of available equity if you use a rental property as collateral.
The others generally agreed.
Q: What if your property is in an LLC and the LLC is in a trust?
A: We’d ask for the trust to guarantee and certify it.
Q: What are closing costs on a line of credit?
Jim: The annual fee is $250/year. Closing costs would be appraisal, title, service fee, etc.
Joe: $300 out of pocket, revolve the line of credit once in a one-year cycle, but then they can renew it for 3 or 5 years. We’ve been seeing owners of real estate who want to use their primary residence as equity, which provides flexibility. Our rates are prime + 0.99.
Darrell: $350 for 3-5 years.
Trevor: We would refer that to our branch staff, but we’re at prime or prime + 1. Our branch customers can get prime – 1.
Jim: We’re still a small bank compared to the big guys. You have to have a minimum family income of $200k to fit into our family banking. Our real estate lines of credit would be prime to prime + 1. There is no true maturity date, but it is subject to an annual credit review.