Apartment loans can either be a short-term or a permanent loan that would fund the purchase and/or renovation of apartment properties with term rates between 3.5 to 4.5% for permanent and 8 to 12% for bridge lending.*
The minimum loan amount is $1,000,000 and can go as high as 100,000,000.
There are several types of apartment loans, which include:
Government backed apartment loans are offered by Fannie Mae, Freddie Mac and FHA. The government agencies offer loan sizes between $1,000,000 and $50,000,000. The general requirements for these three loans are that of a down payment of at least 20% and in this market realistically 25%. All these loans are non recourse to the borrower and offer 30 year amortizations. Please note that the prepayment penalties are very still high and are called yield maintenance.
There are individual requirements for the loan type as follows:
Fannie Mae requires a credit score of at least 680, a DSCR of 1.25, Occupancy rate of 85%, and liquidity of 9+ months. In down markets they may require a payment reserve that is set up.
Freddie Mac requires a credit score of at least 650, a DSCR of 1.25, occupancy rate of 90% and liquidity of 9+ months. In down markets they may require a payment reserve that is set up.
FHA requires a credit score of least 650, DSCR of 1.15, occupancy of 95% and liquidity of 9+ months. These loans are generally geared towards very large construction projects, i.e. 10 million and higher. You can get a 40 year amortization with a loan up to 83% Loan to Cost.
These loans are originated by traditional banks, which sit on their balance sheets. A Bank Balance Sheet loan is not backed by the federal government, instead, banks manage their own process of issuing loans based on internal decision making.
Bank Balance sheet loans are ideal for investors that do reside in the same community that the apartment building is located. These loans have a minimum of $1,000,000, LTV up to 75% and a minimum down payment of 25%. Rates are typically 4.00 to 5.5%*, closing costs between 2-3%, and prepayment penalty that steps down with terms between 10 to 15 years. Most banks are going to amortize the loan at 25 years, but some will do a 30 year amortization. A minimum credit score of 650 is required, DSCR of 1.25 and occupancy of at least 90%.
Please note that the bank will also focus on your personally. They will want to see that you have good outside income and assets. The institution will look at your cash position and cash flow position to make sure you can handle any issues that arise. They will ask for personal tax returns, a personal financial statement, business debt schedule and the like.
These loans are less common because investors usually purchase apartment buildings as long-term investments. These loans are ideal for fix and flip investors who desire a money loan to quickly purchase and renovate while competing with an all cash buyers quick timeline. The minimum loan amount typically is $2,000,000, LTV up to 70%, a down payment of 25 to 30%. The rates are typically 6-10%, origination fees of 2 to 3%, and prepayment penalty of 1%. The terms tend to be between 12-36 months.
The focus here for the lender is to lend on something that has good upside. They do not want to own the property, but will underwrite as if they will. These lenders are more flexible and are looking at your expertise, market knowledge and ability to get taken out. For the most part they are non recourse lenders.
*Please note the lending market changes. All rates and terms on this page are for illustrative purposes only and are subject to change at any time. For exact rates and terms, please call the office or fill out our quote form.
We Have Closed $777,649,954 In Loans To Date
Integrity Capital, LLC.
8160 E Butherus Dr Ste 2
Scottsdale, AZ 85260
48 West Broadway
Salt Lake City, UT 84101
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