Multifamily loans, 5+ units
Agency, HUD, bank and bridge debt for apartment properties. Fannie Mae and Freddie Mac small balance programs start at $1MM, run non recourse, and price tighter than almost anything else in commercial real estate, if the property is stabilized enough to qualify.
Who this is for
Owners and syndicators of apartment properties from a six-unit building to a three-hundred-unit community. Buyers moving up from 1 to 4 unit rentals into their first real multifamily deal. Sponsors refinancing out of bridge debt after a successful value add execution.
What actually sizes a multifamily loan
Three constraints, and the lowest one governs. Loan-to-value against the appraisal. Debt service coverage: net operating income divided by annual debt service, typically required at 1.25x. And debt yield, which is NOI divided by the loan amount, a lender’s sanity check that does not care what a cap rate says a building is worth.
In a low-rate environment LTV usually binds. When rates are higher, coverage binds long before value does, which is why proceeds on the same building can fall by a quarter without the property changing at all. Anyone quoting you a multifamily loan on LTV alone has not sized it.
The other thing that moves proceeds is your expense line. Lenders underwrite to their own expense assumptions, not your operating statement, a management fee whether or not you self-manage, replacement reserves per unit per year, market-rate taxes reassessed at your purchase price. Sponsors are routinely surprised by the tax reassessment, and it is the single most common reason a quote drops between application and credit committee.
What we need to quote
- Current rent roll with lease dates, and trailing twelve months of operating statements
- A pro forma, if there is a business plan behind it
- Purchase contract or current debt payoff
- Sponsor financial statement, schedule of real estate owned and liquidity
- Photos, and a note on capital expenditure completed or planned
Multifamily financing questions
Fannie, Freddie or a bank, how do I choose?
Agency debt (Fannie Mae and Freddie Mac) generally wins on rate, leverage, amortization and recourse for a stabilized property held long term. Banks win on flexibility and smaller loan amounts, and they will look at properties agencies will not: low occupancy, deferred maintenance, an unseasoned sponsor. HUD wins on term and amortization, 35 to 40 years fully amortizing, and asks for the longest process. The right answer depends on your hold period more than anything else.
What does a property need to qualify for agency debt?
Broadly: 90% physical occupancy for 90 days, five or more units, no significant deferred maintenance, in-place income supporting roughly 1.25x coverage, and a sponsor with net worth at or above the loan amount plus liquidity of nine to twelve months of debt service. Properties that miss on occupancy or condition usually go to a bank or a bridge lender first, then agency after stabilization.
Is agency debt really non recourse?
Yes, subject to standard carve-outs: fraud, misappropriation of rents, unpermitted transfers, environmental misrepresentation, bankruptcy filings. Ordinary business failure does not trigger them. You should still read them; the carve-out schedule is the part of an agency loan most borrowers never look at and occasionally regret.
Can I get interest only?
Frequently. Partial-term interest only of one to five years is common on agency loans at moderate leverage, and full-term I/O is available at lower leverage. Interest only improves cash flow and coverage materially, and it costs you amortization, which matters if your business plan depends on paying down the loan before a sale.
What about a value add property that is not stabilized?
That is a bridge deal, then an agency refinance. A debt fund or bank bridge funds the acquisition and renovation. You execute the plan and lease it up, and eighteen to thirty months later you refinance into permanent agency debt at a higher value. We underwrite that exit at the start, because a bridge loan sized without checking the agency takeout is how sponsors end up trapped.
Do you finance build to rent communities?
Yes. Horizontal single-family rental communities and townhome rentals are financeable through both agency and debt fund programs, with the structure depending on whether the units are separately platted and whether they are held as one operating property. Construction comes first, see bridge and construction.
Every deal gets a real answer
Tell us the property, the plan and the number you need. A credit officer reads it and tells you what it will support.
- Texas hard money. A term sheet from the people who fund the loan.
- Commercial, all 50 states. Quotes from the desks that cover your asset.
- Outside the box? A straight reason, and usually a name that does fund it.