Commercial Mortgage Services

Banks

If you are looking to finance your apartment building or commercial real estate with your local bank, you may be under the impression there is no reason to use an intermediary.

This is not the case. Banks have their own niches. There are profound differences between community banks, credit unions, regional banks, and national institutions. Some banks offer fully amortizing 30-year loans, others have amortizations that are limited to 20 or 25 years. Some lenders may cap/limit leverage at 70% LTV whereas others will allow up to 80% LTV on some multi-family properties. Maybe you prefer a shorter prepayment period because you typically refinance or sell/1031 exchange every 2-3 years.

For the above reasons and more, you will likely benefit from working with a mortgage/financing intermediary (like Realty Yield) that has a long list of banking relationships and options.  We can shop your loan for the best rate/terms for your situation and needs.  

Apartment / Multifamily Loan Sources Under $1M

One of the most underserved areas - and one in which securing loans is a challenge- apartment/commercial real estate loans from $500,000 to $1 million.

This is because it costs a lender about the same amount of money to originate a $500,000 loan as a $10M loan. Also, since most apartment/commercial loan originators are incentivized by dollar volume there is less motivation to pursue loans under $1 million, as it may double, triple, or quadruple their workload.  Realty Yield has access to the best lending sources for this high demand, underserved financial/mortgage niche.  

Life / Insurance Companies

For apartment properties, Life Companies offer an alternative to Fannie Mae and Freddie Mac financing, as they have longer loan term options and typically exceptional rates.

However, Life Companies are less competitive when it comes to leverage (LTV), especially when it comes to cash-out refinancing. Life Companies are often the most competitive and viable option for larger balance ($10MM and up) commercial real estate loans for office buildings, retail centers, single tenant retail and other commercial properties. Life Companies do generally focus on the highest class/quality assets, hence they are very selective when it comes to approving financing/mortgages.

CMBS

CMBS loans, also known as conduit loans, are non-recourse and offer low interest rates and relatively high leverage, with LTVs going up to 75% for eligible properties. (CMBS stands for “commercial mortgage backed security,” as these loans are pooled into securities and sold on the secondary market to investors). CMBS financing is often ideal for projects that are not a good fit for agency lenders like Fannie Mae or Freddie Mac.

Since CMBS is primarily asset based, lenders are more likely to approve borrowers with credit or legal issues, such as a recent bankruptcy. These loans are also ideal for situations that require a faster closing process, with less red tape and more focus on the property income than the borrower.  CMBS loans are available for properties in most commercial real estate asset classes, including office buildings, retail centers, apartment buildings, hotels, industrial properties, and more.  CMBS Loans Can Offer Significant Advantages and Benefits for some Multifamily Investors.

NOTE: CMBS borrowers should understand that, unlike bank loans, you will not be dealing directly with your lender after your loan has been securitized and sold to investors. Instead, you will work with a master servicer, a company which specifically works to administer (collecting payments, property inspections, etc.) conduit loans.

Fannie Mae

When it comes to financing multi-family properties, apartments, student housing, affordable housing, assisted living, healthcare facilities, mobile home parks and more, Fannie Mae often offers the most competitive fixed rate and floating rate financing, (with the possible exception of Freddie Mac).

However, qualifying can be a challenge, as Fannie Mae loans require very experienced borrowers with strong financial statements and rigorous property underwriting. Fannie Mae multifamily loans are particularly well suited for affordable housing financing and can fund affordable housing rehabilitation— especially when paired with the LIHTC (Low-Income Housing Tax Credit) program. Fannie Mae financing is also a good choice for financing properties previously under HUD legacy programs that are being converted to Section 8 housing under the Rental Assistance Demonstration (RAD) program.

Freddie Mac

Freddie Mac provides a diverse portfolio of multifamily loan products for both the acquisitions and recapitalizations of apartment communities.

In the past, Fannie Mae was the government sponsored agency of choice for higher balance multifamily lending.  However, in a bid to become more aggressive in the lending market due to increased competition, Freddie Mac released a small balance program in September 2014 to compete with Fannie Mae. Like Fannie Mae, it has strict underwriting guidelines for principals and properties. But once approved, there are very few multifamily lenders that can compete, outside of life companies on larger balance deals. 

HUD-Insured Multifamily Loans

When it comes to building, acquiring, or refinancing multifamily properties, the U.S. Department of Housing and Urban Development (HUD) offers some of the best financing options on the market today.

HUD-insured multifamily loans offer competitive interest rates, long terms, high leverage allowances, and are fully amortizing and non-recourse. In addition, HUD multifamily loans are fully assumable (with HUD/FHA approval).  While HUD loans are excellent for all kinds of properties, including market-rate apartment buildings, they offer additional benefits for affordable properties, and are a great candidate for Low-Income Housing Tax Credits (LIHTCs), housing located within Opportunity Zones and in conjunction with the Rental Assistance Demonstration (RAD) program, which allows certain properties under HUD legacy programs for affordable properties to convert their housing to the HUD Section 8 program. However, despite their benefits, HUD multifamily loans do require a significant amount of paperwork and documentation-- which is why it's essential to have a trusted advisory team that can guide you through each step of the HUD multifamily application, approval, and closing process. 

Hard Money

Hard money loans and private capital for hard money situations were a rarity in the past. However, as markets evolve and capital ebbs and flows, situations might arise that now require hard money.

The benefit to true hard money loans on commercial real estate is that the only underwritten component is the as-is value of the property. This means fast closings and high costs. In the past, borrowers have used hard money because of credit, legal, or financial issues. Hard money financing in commercial real estate is also used when a borrower needs a particularly fast closing because of a deadline, or because financing fell through on a property under contract. In general, hard money is still used every day and for a variety of reasons. That said, hard money may not be your only option, and before applying for a hard money loan, you should know if you have any alternatives available. Please contact Realty Yield for more information.

Bridge Loans

Non-Recourse Multifamily and Commercial Property Bridge loan rates and terms vary subject to sponsorship, loan amount, property type, leverage, and the story behind the need for the bridge financing.

Some common uses of bridge loans are construction completion, stabilization, and rehabilitation.  Bridge loans are ideal for repositioning a property to get competitive permanent financing or sell the asset after the project is managed to stabilization or the "issues" at hand are addressed. Multifamily bridge loans can be taken out with Fannie and Freddie loans, CMBS financing or other bank loans. Most of the same opportunities exist with commercial real estate bridge loans in general outside of Fannie Mae and Freddie Mac permanent financing options.