Loans are an inevitable and very important part of real estate investing; the costs associated with property acquisition are considerable, and few people have the hard cash necessary to build a real estate portfolio. Here, we will give you the basics of financing multifamily apartments even if you are a beginner to this particular type of real estate investing.
The Available Loan Types
One of the most important aspects of a loan of any kind is how much you are paying to secure it. As an example, the short term loan is a viable option for financing multifamily apartments; however, you should be aware of the higher interest rates associated with it. Usually, the loan matures in 3 months, a year or up to 3 years. As is always the case, the true value of the interest is dependent on your creditworthiness (FICO score, mainly).
The more common loan type is longer, spanning from 15 to 30 years of repayment. The interest is commensurately lower as a result of this significantly longer repayment period. The final conventional type of available financing for multifamily apartments comes from your very own federal government – the period of repayment is longer overall at 5 to 35+ years. These loans are given under the auspices of the FHA (Federal Housing Administration).
The Process of Securing a Loan
This will be specific to multifamily apartments – but very similar steps are required for securing a real estate loan in general. First, you will need to specify the total number of units on the property, as well as the occupancy rate to date. Next, your credit score and debt to service ratio must be submitted to the prospective lender (whether federal government or private or public). Your experience in managing multifamily properties is also required, as is how much cash you possess on hand that can be applied to the principal and interest payments.
You can obtain a list of multifamily apartment lenders apart from the options that the federal loan route provides. They include Capital One Bank, Wells Fargo, Greystone and others.