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hi and welcome to the investor financing podcast and i'm your host bo eckstein and today we're going to talk about cpas financing and the states that it is approved in today so what is cpase financing and why would you want it if you're doing large renovation on commercial type properties or building ground up on asset classes like uh industrial multi-family assisted living adaptive reuse projects cpace financing comes into the capital stack and gives you a higher higher leverage welcome to the investor financing podcast where we interview real estate investors and lenders so you can learn all the secrets to getting your projects funded and scale your portfolio learn about fix and flip loans per financing rental fix to rent commercial multi-family bridge loans business loans and so much more and now your host beau eckstein hi and welcome to the investor financing podcast and i'm your host beau eckstein and today we're going to talk about cpace financing and the states that it is approved in today [Music] so if you're watching this on youtube or or the website you can see on the screen all the states that are green those are approved states for c c pace financing so california nevada oregon utah colorado nebraska texas arkansas florida kentucky illinois wisconsin minnesota michigan ohio kentucky virginia pennsylvania new york connecticut rhode island and florida these days right now are approved now they're approved at the state level and then some of the counties have not yet opted in um and some of the counties that aren't yet opted in for the program it is not that hard to get opted in some are more challenging but typically if you're looking at the map the green states here those states are already approved and eligible for cpace financing so what is cpase financing and why would you want it if you're doing large renovation on commercial type properties or building ground up on asset classes like uh industrial multi-family assisted living adaptive reuse projects pace financing comes into the capital stack and gives you a higher higher leverage it's a lot cheaper than mez or pref equity and you're able to achieve like i said higher leverage so right now you might be able to get 60 70 percent load of costs from a bank well cpas financing fills the gap it funds eligible products green eligible products in the construction budget so typically 15 to say 30 of line item budgets could be eligible for this program and essentially you have your senior lender and then you have cpas financing that comes in it doesn't come in like a mortgage on the property like a debt like a traditional lien would be it's actually an assessment like you would see in the property tax bill so it's a little different you have to get senior lender the senior lenders consent that it's okay to finance with pace and that's kind of the trick of this whole thing so it's it's better when you're doing development projects to start with the end in mind engage a cpace lender first get the property pre-approved as far as you know eligible loan proceeds and then you go out and find your senior lender from there you're listening to the investor financing podcast we'll be right back after this break and now a word from our sponsors want to save money on your taxes cost segregation is a strategic tax planning concept that saves money by deferring federal and state taxes through accelerated depreciation get a free benefit analysis today please visit cospseghub.com for more information on cost segregation and all of our cost recovery services that can put more cash flow in your pocket so that's how we're doing this in the capital stack typically you're going to want 15 borrower or sponsor equity in the deal and there's kind of a underwriting system that we use that that measures there's debt service coverage ratio there's a pace to value ratio there are certain ratios we use to underwrite these deals and collectively we underwrite on the stabilized value and the stabilized cash flow and we're looking for depending on the asset type a debt service coverage ratio of anywhere from 1.15 to 1.45 depending on the asset class itself and that's with the senior debt in our debt based on the stabilized cash flows and values so we're able to achieve higher leverage at a lower cost typically than prefer mez uh debt and it it works really well and the key for for developers out there listening to this is to you know engage engage us first on these type of projects and then go out and get senior debt because although there's been you know 250 300 lenders out there that have already banks and credit unions that have approved it there's a lot of banks and lenders that don't know anything about cpace and they just are a little bit resistant so there's a process of engaging these bankers to get them to approve this and then depending on whether where the property is located in the county and the city there's different charts as far as what items are eligible for the build but but really to assess these properties we we need a pro forma a value a stabilized value a construction budget and some information on the sponsors developers we can quickly do a a rough kind of quote and then then from there we do a term sheet to let you know what you can expect you get a term sheet it gives you uh your loan pro gross loan proceeds breakdown of of the cost and expenditures and then from there that's when you go and you shop for your senior debt on these development and construction projects we're seeing a lot of them coming in for adaptive reuse where you're taking them you're taking a an office building converted to multi-family or something like that a lot a lot of a lot of pace financing in there multi-family hospitality assisted living it's a great tool i'm happy to share my knowledge with you if you're interested in learning the uh all the benefits of cpase financing thanks for plugging in and i will see you on the next episode thanks for listening to the investor financing podcast for show notes and useful resources please visit investorfinancingpodcast.com for questions or comments email info at investorfinancingpodcast.com if you enjoy our show please share it with your network until next time