Commercial Mortgage Loans; Lenders Have Billions to Lend for Apartment Buildings (Mulit-Family)

There is ample reason for most commercial real estate investors to despair during the “credit squeeze” that we are now experiencing.
The recession has devastated the retail, office and hospitality sectors of the industry and developers can’t find financing anywhere. But amid the doom & gloom, so prevalent in the commercial real estate finance industry, there is a bright-spot; it is multi-family.

Apartment owners are finding that there is no shortage of liquidity for funding purchase or refinance loans against stabilized apartment buildings. Even in this weak economy and credit crisis banks and other traditional lenders have been committing hundreds of billions of dollars to multi-family lending.

There are 2 reasons that lenders are still willing to write apartment building loans. The first is the fact that stabilized (low vacancy) apartments make great collateral for the banks shareholders. Apartment buildings are not immune to economic downturns, but tend to hold up better than most other income generating real estate when things turn bad. After-all, people have to live somewhere even during recessions. Buildings that are full of good tenants with long leases sell quickly and at premium prices. Multi-family assets are prized by investors and lenders alike.

The second and probably most important reason that multi-family loans are still flowing is because the Government is buying them like crazy. Fannie Mae and Freddie Mac have an almost unlimited appetite for loans against apartment buildings. Large or small Fannie and Freddie will buy them all (as long as their standards are adhered to). Lenders know that properly underwritten multi-family mortgage paper can be turned into cash at a moment’s notice, so they are not at-all afraid to write apartment loans.

That is not to say that standards have not tightened, they have. It is harder to get a loan for a multi-family asset than it was 2 years ago, but, unlike other asset classes, you can get a loan.

The typical loan-to-value (LTV) ratio is now 75% (+/-) and lenders will insist on good occupancy and decent cash-flow. Borrowers will need to have a credit score of 640 or better and will need to demonstrate personal financial stability. The property must be in good repair (not much deferred maintenance) and be in a good location. Current interest rates are at very attractive, historic lows and most lenders can fix today’s low rates for 5, 7 or even 10 years. The loans are usually amortized over 25 or more years so monthly payments are very manageable.

The credit crisis is a serious problem and investors who can’t meet bank standards will be forced to seek more expensive, private funding sources. Credit worthy investors with good, income producing properties, however, will have no problem finding the funding they need.

MasterPlan Capital LLC has a new, small balance ($1MM-$5MM), multi-family commercial mortgage loan program and is actively funding the purchase and refinance of stabilized apartment buildings. We have over $100MM in lending capacity dedicated to small multi-family loans. Borrowers may apply online. Our simple, 1 page commercial mortgage loan application takes only a moment to complete and we will respond the very next business day.

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