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Recently, there have been some positive reports for Apartment building owners and multifamily investors. An estimated 6M homeowners are now under water and approximately 90% of these homeowners will need about 5 years to break even assuming that the home values will not decline any further. Apparently, most of these home owners have the financial means to continue payments but choose to walk away from their homes. This is certainly beneficial to apartment building owners as some of these 6M+ homeowners will become renters. I've also read reports that about 70% or so of the commercial real estate investors consider buying multifamily properties as they believe apartment building or assisted living sectors are the first to recover. Financing is still difficult in this tight credit market however there are several financing options. Apartment building loans or a multifamily loan can be obtained through different sources such as banks, private lenders, insurance companies, pension funds, government bodies, etc. Besides apartment buildings, multifamily financing can also be received for senior housings, student housings, manufactured housings, as well as affordable housings. And since an investment such as this has to be considerable, it is pertinent that you have your basics in place.
Analyzing the Investment:
Before you look for multifamily or apartment building financing, carrying out a detailed analysis of the property in question is required. The factors that need to be taken into account include the cash flow, the operating expenses, overall rental income, debt service, vacancy loss, etc. A detailed analysis would give you a clear picture of your investment's performance, and would also highlight any area of concern. The next step would be to look for the multifamily or apartment financing options.
The Options:
The various options that a borrower has when it comes to seeking an apartment building loan or a multifamily loan include banks, private investors, Freddie Mac, Fannie Mae, HUD/FHA, etc. With these plethora of options made available, consulting a professional broker/consultancy firm can definitely be helpful. This is also because they can help you understand the various intricacies that are involved in getting the desired loan.
The Intricacies:
For starters, you should know that different lenders and banks have different limits in terms of the minimum and maximum amount that can be made available. Next in line are the various types of loan programs, followed by the different sets of terms & conditions, underwriting methods, interest rates, pre-payment penalties, time period, etc. The interest rate could be as low as 5%, and the loan term could be as long as 25-30 years. Bear in mind that lenders would take factors such as the type of property, its presentation, its location, and well as its condition into consideration before deciding whether financing should be provided.
The Monetary Aspects:
Understand that multifamily financing or apartment building financing is normally available for around 60% - 80% of the property's value, and alternatively this could also be governed by the Debt-Service-Conversion-Ratio (DSCR) of the given property. The DSCR helps determining whether the building would qualify for the loan. A property classified to be in poor or fair condition could require a significantly larger down payment and there is also a possibility that it might not qualify for financing.
Since looking for an apartment building loan or a multifamily loan does need a thorough understanding of the process, an experienced firm can help protect you from unscrupulous elements when you need an acquisition loan or refinance your existing debt.
Recently, there have been some positive reports for Apartment building owners and multifamily investors. An estimated 6M homeowners are now under water and approximately 90% of these homeowners will need about 5 years to break even assuming that the home values will not decline any further. Apparently, most of these home owners have the financial means to continue payments but choose to walk away from their homes. This is certainly beneficial to apartment building owners as some of these 6M+ homeowners will become renters. I've also read reports that about 70% or so of the commercial real estate investors consider buying multifamily properties as they believe apartment building or assisted living sectors are the first to recover. Financing is still difficult in this tight credit market however there are several financing options. Apartment building loans or a multifamily loan can be obtained through different sources such as banks, private lenders, insurance companies, pension funds, government bodies, etc. Besides apartment buildings, multifamily financing can also be received for senior housings, student housings, manufactured housings, as well as affordable housings. And since an investment such as this has to be considerable, it is pertinent that you have your basics in place.
Analyzing the Investment:
Before you look for multifamily or apartment building financing, carrying out a detailed analysis of the property in question is required. The factors that need to be taken into account include the cash flow, the operating expenses, overall rental income, debt service, vacancy loss, etc. A detailed analysis would give you a clear picture of your investment's performance, and would also highlight any area of concern. The next step would be to look for the multifamily or apartment financing options.
The Options:
The various options that a borrower has when it comes to seeking an apartment building loan or a multifamily loan include banks, private investors, Freddie Mac, Fannie Mae, HUD/FHA, etc. With these plethora of options made available, consulting a professional broker/consultancy firm can definitely be helpful. This is also because they can help you understand the various intricacies that are involved in getting the desired loan.
The Intricacies:
For starters, you should know that different lenders and banks have different limits in terms of the minimum and maximum amount that can be made available. Next in line are the various types of loan programs, followed by the different sets of terms & conditions, underwriting methods, interest rates, pre-payment penalties, time period, etc. The interest rate could be as low as 5%, and the loan term could be as long as 25-30 years. Bear in mind that lenders would take factors such as the type of property, its presentation, its location, and well as its condition into consideration before deciding whether financing should be provided.
The Monetary Aspects:
Understand that multifamily financing or apartment building financing is normally available for around 60% - 80% of the property's value, and alternatively this could also be governed by the Debt-Service-Conversion-Ratio (DSCR) of the given property. The DSCR helps determining whether the building would qualify for the loan. A property classified to be in poor or fair condition could require a significantly larger down payment and there is also a possibility that it might not qualify for financing.
Since looking for an apartment building loan or a multifamily loan does need a thorough understanding of the process, an experienced firm can help protect you from unscrupulous elements when you need an acquisition loan or refinance your existing debt.