Hard Money/Private Lending on Multifamily Housing
Real Estate Broker · Twin Lakes, WI · Member since 2019 · 16 posts · 5 votes
Hard Money/Private Lending on Multifamily Housing
Most Popular Reply
Orlando, Baltimore · Member since 2023 · 24 posts · 9 votes
9moI did my first 5-unit property last year after completing a few SF properties. There are several differences:
1. Your LTV for refinance will be much lower - usually 60%-65% instead of 70%-80%
2. You will need to pay for a commercial appraisal which is a lot more expensive (mine was $10,000 from CBRE). I only had to pay for this for the refi, but you may need it on the purchase side as well, depending on who you are using for your lender.
3. Your rates will be higher. Mine was 100 bps (1%) higher than what residential loans were doing at the time.
4. You will need to have a certain number of units rented before they will close on a cash out refi (in my case, 3 of the 5 units needed to be leased.)
5. You may have a seasoning period before you are allowed to refi.
6. There are things with the renovation that you will need to do for a commercial proeprty (5+ units) that you don't need to do for a residential property. For example, you will need fire alarms, exit signs, and potentially fire escapes or a sprinkler system depending on the size and type of the building.
7. The permitting and inspection process is MUCH longer.
On the plus side though, your property will be valued based on what YOU do with the property (the net operating income) instead of based on what your neighbors did with theirs (comps). I was able to force over $300k of equity on my first small property because of this and was able to cash out $75k, where for all of my SF deals I had to leave money in them...
Hope that helps! Good luck!
3 Replies
- Lender · Los Angeles, CA · Member since 2018 · 67 posts · 35 votes9mo
Not an amateur question at all—this is exactly the point where most residential investors hit a wall moving into multifamily. The short answer, yes. The same general fix-and-refi strategy exists, but the process and terms are different. For 8–20 units, you’re looking at conventional commercial financing or bridge loans rather than typical residential hard money. Expect higher underwriting scrutiny—like personal and business financials, property pro formas, reserves, different debt service coverage ratios, and occupancy… especially when refinancing out of the bridge. You’ll also want to familiarize yourself with commercial loan covenants, because they’re stricter than residential. Nothing you’re doing is overly complicated, but treating it like a residential deal can get you burned.
- Orlando, Baltimore · Member since 2023 · 24 posts · 9 votes9mo
I did my first 5-unit property last year after completing a few SF properties. There are several differences:
1. Your LTV for refinance will be much lower - usually 60%-65% instead of 70%-80%
2. You will need to pay for a commercial appraisal which is a lot more expensive (mine was $10,000 from CBRE). I only had to pay for this for the refi, but you may need it on the purchase side as well, depending on who you are using for your lender.
3. Your rates will be higher. Mine was 100 bps (1%) higher than what residential loans were doing at the time.
4. You will need to have a certain number of units rented before they will close on a cash out refi (in my case, 3 of the 5 units needed to be leased.)
5. You may have a seasoning period before you are allowed to refi.
6. There are things with the renovation that you will need to do for a commercial proeprty (5+ units) that you don't need to do for a residential property. For example, you will need fire alarms, exit signs, and potentially fire escapes or a sprinkler system depending on the size and type of the building.
7. The permitting and inspection process is MUCH longer.
On the plus side though, your property will be valued based on what YOU do with the property (the net operating income) instead of based on what your neighbors did with theirs (comps). I was able to force over $300k of equity on my first small property because of this and was able to cash out $75k, where for all of my SF deals I had to leave money in them...
Hope that helps! Good luck!
- 9moDenise SuppleeBusiness MemberRealtor · Willow Grove, PA · Member since 2017 · 993 posts · 647 votes
Hi @Jordan Epping, Yes, the concept is similar, but multifamily is underwritten very differently. In commercial deals the focus is on the property's income and DSCR, not your personal DTI, and refinances are based on stabilized NOI rather than comps. You can absolutely do a value-add, short-term loan into a refinance on 8–20 units without syndicating, but expect stricter reserves, higher down payments, and more emphasis on operating history. The process isn't harder, just more numbers-driven and less borrower-focused than residential. I have some experience with larger multifamily through my co-investing club, so happy to help if you have any other questions.
Spark Rental Co-Investing Club582 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.