case stady ilustrator 01
Apartment Loans

What are Apartment Loans?

Apartment loans are loans tailored to the financing of apartment buildings for real estate individual investors, institutional real estate investors such as REIT’s.

Should you invest in Apartments?

Purchasing an apartment complex is more complex when compared to buying single family residential (SFR) properties. The level of risk increases when purchasing apartment complexes, however the properties net operating income, return on investment and value appreciates at a greater rate if managed properly.

Pros

  • Diversified rental income and tenant list
  • Vacancy is dependent on a single unit
  • Greater net operating income and rate of appreciation
  • Greater probability of a higher return on investment

Cons

  • An investment asset that isn’t easily liquified
  • Riskier loans
  • Loan qualification is difficult and competitive

Private Money Lenders vs Banks

Private Money Lenders

Private money lenders such as Arbor Realty and Roc Capital are both private money lenders for real estate investors looking to acquire multifamily properties such as apartment buildings. Private money lenders offer a greater level of flexibility with their loan terms as they are focused on dealing with real estate investors.

Banks

Banks have one competitive advantage over private money lenders: cheaper interest rates. However, banks have strict guidelines that they need to follow, especially publicly traded banks such as Bank of America and JP Morgan which limits their level of flexibility.

Financing Options

Fannie Mae Apartment Loans

Fannie Mae offers two options: conventional loans and specialty loans. Both will require a 20% down payment if not more. Fannie Mae offers competitive interest rates.

Freddie Mac Apartment Loans

Freddie Mac offers four options: conventional loans, small balance loans, targeted affordable housing, and senior housing. Freddie Mac offers competitive interest rates, repayment terms and terms. Freddie Mac requires a 20% down payment if not more.

FHA Apartment Loans

A Federal Housing Administration (FHA) loan is insured by the Housing and Urban Development (HUD) department. This option offers cheaper interest rates and better terms for borrowers. These loans offer more competitive rates due to the fact that they are insured by the Housing and Urban Development department