When owning an income-producing rental property, the property falls into one of two categories; residential rental property or commercial rental property.
Residential rental property can be single-family or multifamily units. Meaning if you have a home that only one family can live in, that is a single-family unit. Multifamily properties have at least two separate units, such as a duplex, up to 4 units, like a quadplex or small apartment building.
Purchasing multifamily rental property has one key difference from buying single-family homes, and that is the type of financing available. If an investor is going to rent the entire property and NOT live in a unit, you will need a commercial loan. If an investor is going to occupy a unit, they could apply for residential consumer financing.
Multifamily loans, where the investor is purchasing the property to rent out all of the units, will need commercial financing.
Multifamily loans are commercial real estate loans for a rental property with 2 to 4 units. Because these properties are income producing a lender considers them commercial, and the requirements for a commercial mortgage is the same.
Lenders require the same underwriting as any commercial real estate loan.
Lenders will look at:
The multifamily loan process has many variables, including terms (interest only, amortization schedules), rates, fees, the type of recourse, leverage, the ability to assume a mortgage, pre-payment requirements, subordinate financing, and much more. Working with a lender who has a streamlined underwriting process is crucial to speed up the underwriting and loan process.
When securing a multifamily loan and jumping through hoops, it may seem like a confusing and complicated process. After obtaining your first multifamily loan; however, you will start to see the benefits of the loan.
Benefits of multifamily loans include:
Making sure your property paperwork, tenant documentation, and credit information are all straight forward for a lender to efficiently complete the underwriting process is essential to completing the multifamily loan process quickly.
Clik.ai has been helping Multifamily Real Estate investors, brokers, lenders, and managers navigate multifamily loans since 2017 and have helped identify $12 Billion in commercial real estate opportunities.
By working with the Servicing Hub, Multifamily Real Estate investors and lenders can reduce operating expenses, stay competitive, free up time to focus on lending relationships, and spend time on deal analysis rather than paperwork for multifamily loans.
When looking for a company to help with multifamily loans, consider the Services Hub. Our on-demand team of commercial real estate analysts has expertise in multifamily loans, lease abstraction, automated multifamily underwriting, and much more.