When purchasing or renovating an apartment building, it’s essential to be aware of your financing options. Doing so will enable you to get the best deal possible.
When looking for a mortgage lender, the first thing you should consider is your lender. While banks may be the first option that comes to mind, they may not always be your best bet.
1. Banks
Banks play an essential role in financing multifamily properties. They offer both construction and permanent loans for apartment buildings, as well as a range of financial products and services.
Bank lenders include savings and loan institutions, credit unions, and other specialized banking entities. Some of these banks also provide mortgage loans.
Another type of apartment financing option is a commercial mortgage backed security (CMBS) loan, which is an asset-based commercial real estate loan pooled together and securitized before being sold on the secondary market. CMBS loans usually feature low interest rates and forgiving borrower requirements; however, their entry point can often exceed $2 million.
An additional advantage of CMBS loans is that they can be assumed by the new owner of the property if the original borrower decides to sell. This eliminates them from having to pay any prepayment penalties on their original loan. It’s essential that you thoroughly research these types of loans before selecting one for your next investment.
2. Government Programs
Government programs exist to encourage the construction or renovation of affordable apartments. These range from tax-exempt and taxable bond programs designed to assist developers in creating or renovating housing units.
Programs such as these are available to both for-profit and non-profit apartment developers. Not only can they provide you with the financing you need, but they also guarantee your property remains up to code so it remains safe and healthy for occupants.
In addition to these programs, there are a variety of government assistance grants that can assist with funding your apartment complex construction. These grants typically come at no cost from the government so if you qualify, it could be a huge help in terms of finances. To learn more about these programs and how much funding is available, visit the Department of Housing and Urban Development’s website.
3. Private Lenders
If you’re an apartment property investor, there are various financing options available to you. One popular choice is working with a private lender.
These lenders provide loans based on real estate, usually offering shorter repayment periods than banks. Furthermore, they’re usually more accommodating when it comes to qualification requirements.
When selecting a private lender, one of the most important factors to consider is their reputation and experience. You want to find a company that is reliable and has plenty of positive reviews.
Finding the ideal private lender requires building a strong network. This can be accomplished through networking with other industry professionals, asking family and friends for recommendations, or searching online.
Private lenders provide apartment financing with a number of advantages, such as quicker loan approval processes and lower interest rates. Furthermore, they’re more accommodating and can help secure loans on difficult-to-finance properties. Finally, private lenders provide an invaluable resource for purchasing distressed properties and quickly flipping them.
4. Blanket Loans
If you own multiple rental properties, one of the best ways to simplify financing is through a blanket loan. These loans allow for all your properties to be under one mortgage, making managing finances and cash flow much simpler.
Blanket loans are an ideal solution for landlords looking to add new properties to their rental portfolio. Since these loans cover an unlimited number of assets, there’s no need to worry about exceeding the federal limit on mortgages you can maintain.
Unfortunately, this type of mortgage is more difficult to acquire than other real estate loan types. That is, not every bank or private lender offers it.
These loans are commonly utilized by real estate developers or companies with large parcels of land that they plan to subdivide into multiple units. They could also be utilized by house flippers for purchasing a substantial number of homes all at once.
