Multifamily borrowers are continuing to benefit from a strong rental market. Many are taking advantage of the increased rents and NOI’s by refinancing and pulling cash out to be used for a variety of purposes, such as returning equity back to investors, performing capital improvements, or applying the funds toward additional investment opportunities.
- Banks and credit unions will typically lend up to 70 – 75% LTV on stabilized assets.
- They are typically looking for 24 – 36 months of seasoning shown through a leveling of revenues and expenses on the operating statements, prior to allowing a full cash out of all the borrower’s equity on value-add deals.
- If the borrower has owned the property for less than 18 – 24 months, the lenders will typically offer loan proceeds based upon the borrower’s total cost, and not on the current perceived value of the property.
- Fannie Mae and Freddie Mac remain the most competitive non-recourse multifamily lenders for investors looking for longer term, fixed rate, loans at higher leverage.
- Life Co’s most competitive at lower leverage with some offering full term IO, forward rate lock, or more unique structures.
- The agencies will lend up to 75 – 80% LTV after 18 months of ownership, and can provide supplemental financing after 1 year of placing the initial loan.
- While short term borrowers have seen coupon rates rise due to increasing 30-day LIBOR, decreasing lender spreads have helped buffer the increase.
- Treasury rates remain steady and long term borrowers can still obtain 10 year money in the high 3 to low 4% range depending on loan size, asset quality, and location.