Apartment and Multifamily Construction Loans
Multifamily & Apartment Construction and Development Financing
Construction financing is back again, and terms are more competitive than ever. For apartment construction loans, HUD is, as always, offering the most competitive fixed rate, fully amortization, high leverage, non-recourse financing, but as you already may know, those HUD 221(d)(4) deals come with a good amount of red tape and a long timeline (generally 7 - 10 months to close). Small banks are currently lending up to 65% of project cost at PRIME + 1.50%+/-, regionals are a bit more aggressive and lending at as as low as LIBOR +2.50%. The nice thing about bank construction loans are that they are available for most commercial property construction including mixed use, office, retail, industrial, and more. They also allow you to take your finished/stabilized product and recapitalize once the project is complete with a cash out refinance or sale, with limited or no prepayment penalty. For multifamily properties, Fannie, Freddie, and CMBS offer unlimited cash out, up to 80% LTV depending on the particular scenario. HUD loans, although offering the highest leverage, do not generally allow for recapitalization (there is a lockout period followed by a hefty prepayment penalty). For commercial properties; life companies and banks offer comfortable permanent financing options with some level of recapitalization or earn-outs.
Important Loan Points
- HUD Loans are available for market-rate properties (not just affordable properties).
- Bank, hedge fund, life company, and other construction loans are available.
- HUD loans are non-recourse, including during the construction period.
- Fixed Rates Available for Construction and Permanent Financing with HUD.
- 1.11 DSCR for Affordable Housing Projects with HUD FHA 221(d)(4).
- Small bank loan (under $4MM) rates start at Prime + 1.50%.
- Bank loans for larger construction projects start at LIBOR + 250bps.
- Bank loans are generally full recourse during the construction period with some offering burn-off options after c/o and stabilization.
Bank and HUD Apartment Construction Loans are available. Click the button below to share some information with us and a multifamily construction loan specialist will reach out to you and discuss your options including potential pricing, leverage and timing.
Sample Construction Loan Terms For Multifamily and Commercial Property
Terms as of April, 2017
Size: Generally $2 Million and up.
Amortization: Up to 40 years fixed and fully amortizing (with HUD FHA 221(d)(4)).
Maximum LTC: 75% (85% with HUD for market-rate properties).
Rate: Starting from 3.00% interest only, floating.
Maximum LTV: 75% (no maximum LTV with HUD 221(d)(4)).
Minimum DSCR: 1.20