Commercial Mortgage Loans; Commercial Real Estate Investors Can Still Get Loans for Apartments – Plenty of Money for Multi-Family Lending

The credit crunch has devastated the commercial mortgage industry. Virtually no institutionally funded (bank) commercial mortgage loans are being written for development, construction or against underperforming properties. That means no land loans, and no rehab loans. Certain areas of the country have been completely red-lined by the big national banks, Wall Street brokers and Hartford insurance companies. If you want to invest in FL, NV, MI or parts of CA you can forget getting a low interest bank loan. Hard money, privately funded loans are the only game in town for most commercial real estate professionals today.

There is, however, one notable exception; apartment buildings. Multi-family properties are still being funded even during this slow-down. Apartments tend to hold up well even in recessions; after-all people have to live somewhere.

The real reason multi-family loans are still being written is because Fannie Mae and Freddie Mac are still buying them. There are billions of dollars in liquidity for apartment building loans thanks to Uncle Sam. The banks know that the loans they make can be turned into cash at a moments notice by selling them to Fannie or Freddie so they are not afraid of extending credit against good quality apartment houses.

That is not to say that standards have not tightened in the multi-family sector, they have. To qualify an apartment building or complex has to be “stabilized” which means that it must make enough money to pay its own mortgage. Lenders will look for a debt-service-ratio (DSCR) of 1.25 or better. The borrower must have a decent credit score upwards of 640 and should have some experience running apartments. Most loans are being written at between 70% – 80% loan-to-value ratio (LTV).

The really good news is that rates are quite low right now. Many property owners are locking in rates under 7% right now (Jan. ’09). Some lenders are willing to fix these low rates for 5, 7 or even 10 years. Loans are typically amortized over 25 years, so payments are low and profits can be high.

There are not many bright spots in the world of commercial real estate finance but lending against apartments is truly one of them.

Apartment Building Loans – 5 Year Fixed – 6.5% (subject to change) – To 75% of Value (75% LTV) – Purchase or Refi – MasterPlan Capital LLC – Easy, 1 Page Commercial Mortgage Application, Online – Quick Response – Professional Service

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