Multifamily Loans for 5+ Unit Properties
A multifamily loan finances the purchase or refinance of a residential property with five or more units, such as an apartment building.
It fits investors and owners of stabilized or value-add apartment properties, with options ranging from long-term agency loans to short-term bridge loans.
Multifamily Loans quick facts
These are the typical terms for multifamily loans. Your actual terms depend on underwriting.
| Typical amount | $500,000 to $25,000,000+ |
|---|---|
| Typical term | 5 to 35 years (permanent), 12 to 36 months (bridge) |
| Typical funding speed | Typically 30 to 75 days |
| Typical minimum requirements | 1.20x to 1.25x DSCR, up to 75% to 80% LTV, 660+ credit, net worth and liquidity |
| Cost structure | Fixed or floating interest rate, plus lender and third-party fees |
Multifamily Loans: good fit or not?
This option works well for some situations and is a poor match for others.
Good fit
- Stabilized apartment buildings with documented rent rolls
- Value-add properties with a business plan to raise occupancy or rents
- Investors moving from 1 to 4 unit rentals into larger assets
- Refinances to lower rate, extend term, or pull out equity
Not a good fit
- Properties with 1 to 4 units (see DSCR loans)
- Owner-occupied housing
- Properties with very low occupancy and no clear plan (consider bridge)
Documents usually needed
Having these ready typically speeds up review. A funder may request additional items.
- Current rent roll
- Trailing 12 month operating statement (T12)
- Purchase contract or current mortgage statement
- Personal financial statement and schedule of real estate owned
- Entity documents for the borrowing entity
- Recent property tax and insurance bills
Multifamily Loans: how it works
The process typically follows 4 steps from first conversation to funding.
Submit the deal
Share the rent roll, T12, and purchase or refinance details.
Size the loan
We review leverage and coverage with funders and present term options.
Third-party reports
Appraisal, environmental, and property condition reports are ordered.
Close
Loan documents are signed and the loan funds at closing.
Multifamily Loans vs. Bridge Loan
The main difference comes down to structure, cost, and timing. Here is how they typically compare.
| Feature | Multifamily Loans | Bridge Loan |
|---|---|---|
| Property condition | Stabilized occupancy | Transitional or value-add |
| Typical term | 5 to 35 years | 12 to 36 months |
| Typical speed | 30 to 75 days | 2 to 4 weeks |
| Rate | Lower | Higher |
Typical characteristics. Terms vary by funder and file.
Multifamily Loans FAQs
What counts as a multifamily property?
In commercial lending, multifamily usually means a residential property with five or more units. Properties with one to four units are financed with residential investor loans such as DSCR loans.
What is DSCR and why does it matter?
Debt service coverage ratio compares the property net operating income to its annual loan payments. Most permanent multifamily loans require at least 1.20x to 1.25x.
Are multifamily loans non-recourse?
Agency and some larger loans may be non-recourse with standard carve-outs. Smaller balance bank loans more often require a personal guarantee.
Can I get a multifamily loan as a first-time apartment buyer?
Possibly. Some funders accept experience with smaller rentals or will consider a partner or third-party manager with multifamily experience.
What is a prepayment penalty on a multifamily loan?
Many permanent loans include yield maintenance, defeasance, or a step-down prepayment schedule. Bridge loans usually have shorter or lighter prepayment terms.