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Understanding the Various Multi-Family Real Estate Loans

Feb 6th 2020 at 5:55 AM


Real estate investments can be complex, so proper knowledge regarding the market and its various factors is extremely important. As far as multi-family financing options are concerned, there are different types of loans available such as apartment building loans, multi-family housing loans and multi-family construction loans. When you know the purpose of your investment before seeking financing, finding options that will fit your needs will be much easier.

Investing in an apartment building or any multi-family real estate is a big decision. Proper due diligence and research is always required. For such investments financing plays a vital role. One avenue of financing is through apartment building loans from commercial lenders.

In California, due to the high values of real estate, financing is often times required.  Even for investors with large cash reserves, the leverage that financing offers is typically beneficial. If you are looking for commercial apartment building loans in California, it is crucial for you to be well versed with the commercial multi-family lending process.

Multiple loan options are available, and each comes with a particular set of terms and conditions. You need to understand the different types of multi-family financing if you want to make smart decisions in terms of investment financing.

Types of Multi-family Financing

A multitude of options are available for multi-family investors when it comes to securing financing for potential real estate purchases. Lending products depend upon various aspects such as the type and size of the multi-family buildings along with the purpose of the funds.

Apartment Building Financing

A residential property with five or more separate homes is considered as an apartment building. As the size of the asset is larger, the process of apartment building loans is a bit more stringent than for single family homes.

With this type of collateral, the lender takes multiple property metrics such as debt service coverage, net operating income and loan-to-value ratio into consideration. Also, the credit score, income and industry experience of the borrower comes into play.

Multi-Family Housing Financing

Multifamily housing options include duplexes, triplexes, quad-plexesand condos. For such type of real estate assets there are two different types of traditional financing options i.e. conventional mortgage loans and the loans backed by government programs like FHA.

If you are intending to invest in any of these multi-family housing options then you can opt for either of these loan options.  Occupancy will pay a factor in determining what specific programs you can qualify for.  If you intend to occupy a unit, there will be some options available that would not be if the property were strictly for investment/rental purposes.

Multi-Family Construction Financing

The multi-family construction loans are meant for financing the development or restoration of multi-family buildings/projects. These loans have short terms, typically one year. In certain cases, the borrower needs to pay interest on the construction loan while the project is in progress.

Once the work gets completed the loan needs to be repaid or can be refinanced into a permanent mortgage or a new loan. Usually, these loans are offered by credit unions and banks of the region.

Author Information:

This article is written by All California Lending, a premier financing source in California. They specialize in commercial lending throughout California including apartment building loans. To learn more about their financing procedure visit

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