APARTMENT / COMMERCIAL FINANCING & MORTGAGE

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.

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 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. 

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.

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.

Some firms offer loans that are funded by private individuals (or a group of private individuals), instead of from a company’s assets. Private lenders are often willing to receive loans with higher levels of risk in return for a higher return rate on the investment.