Investing in multifamily apartments continues to be a good way to get into commercial real estate. And whether the investment is in “residential” rental property (1-4 housing units), or “commercial” rental property (5+ units), financing is essential. Residential properties will be the easiest to finance with lower barriers to entry.
Why Do People Invest in Multifamily Apartments?
The reason for investing in multifamily apartments includes predictable rents, generally good re-leasing conditions, and thus solid cash flow. There is good (but not guaranteed) value appreciation potential and multifamily apartments are generally regarded as having lower risk compared to other real estate categories. Plus, there are tax advantages for investing in multifamily apartments.
Why Now is a Good Time to Invest in Multifamily Apartments
In many cities across the U.S., there is currently a favorable supply and demand relationship. That is facilitated by some limits in the new construction pipeline, the escalating price of homes, and a corresponding decline in homeownership.
Key Things to Know About Multifamily Apartments Financing
Financing loan amounts, interest rates, and terms can vary considerably depending on the type of financing and the financial institution providing the loan. Conventional multifamily mortgages typically have terms of 15 or 30 years compared to government-backed loans that can be issued for 5 to 35 years. And short-term loans can have terms of 6 months to 3 years.
Mortgage loan requirements will focus on the number of units in the property and these factors will be considered in the loan: credit score of the borrower, current property occupancy, the borrower’s real estate investment experience, and available cash reserves.
Conventional financing can be obtained through banks, life insurance companies, and “agency” loans backed by the government entities Fannie Mae and Freddie Mac. Commercial mortgage-backed securities can be arranged as well.
There is also alternative financing through hard money lenders, online marketplaces, and debt funds.
Seek Expert Funding Assistance
Contact Lighthouse Capital to get the expert funding assistance you need to grow your investment enterprise and achieve your dreams. We offer broad resources that you can rely on.