Any real estate investor can list the many pros of commercial real estate; in the case of multifamily apartments, the investment is a big point in favor of diversification. The plenitude of units means you worry much less about vacancies than in the case of a single-family unit. Of course, there are also some potential drawbacks – in particular, the difficulties that an inexperienced investor may have in managing several units. This blog seeks to help you with securing financing for multifamily apartments.

Commercial Real Estate Loan Options

Bank loans are notoriously difficult – as well as often inadequate – for funding multifamily apartments. The average loan has a 25-year amortization, with a 50year adjustable-rate term and an average 73% LTV. There are almost always better financing options out there. However, some of these include HUD/FHA Multifamily Loans and financing via Fannie Mae and Freddie Mac. One of the major benefits is the longer amortizations and higher LTVs (30 years and 80%, respectively). If you’ve got good credit and net worth at least as large as the required loan, then you’ve got an excellent chance at securing one of these.

The CMBS Option for Multifamily Apartments

A commercial mortgage-backed security (CMBS) is also known as a conduit loan. These are viable options if you need over $2 million for your multifamily apartment investment. In addition, you can obtain one via the secondary market. You will marvel at the generally lenient requirements they have for borrowers, but it can be an involved process in servicing one since CMBA loans are presided over by a servicing company, instead of the original lender.

Overall, despite the potentially involved process in securing a loan for multifamily apartment investing; it is often a worthwhile endeavor due to the diversification of risk it confers on your real estate portfolio. For more information, please contact KPI Commercial Capital.