Non Recourse Lender for Apartment/Multifam

[Nic A.]

I have some funds in an IRA that I want to move out of the markets and into real estate. I had saw an article about this in BP but I cannot find it now. Anyone know of that article or have banks in mind that can tackle this with me.

Thanks!

[Kyle Jean]

For non-recourse your big three are going to be:

1) FHA/HUD - highest leverage and longest term non-recourse notes, but more particular about what projects qualify, higher programmatic costs (including third parties), and more scrutiny on property condition. No income restrictions required (can be 100% market rate).

2) Fannie Mae/Freddie Mac - Shorter terms than FHA, often carry onerous prepayment penalties (yield maintenance), but faster processing time, lighter on costs, less scrutiny on property condition, and still pretty high leverage depending on market. No income restrictions required (can be 100% market rate).

3) Conventional (bank). For very strong requests and borrowers you may get a local lender to go non-recourse. It's rare and usually lower leverage. No income restrictions required (can be 100% market rate).

You may find some insurance companies or other groups who are willing to go non-recourse but they're usually very low leverage (65% or so).

If you're looking at smaller requests, a small balance Fannie/Freddie program from someone like Hunt, Pillar, Arbor, Sabal, etc will likely be more economical. If looking at larger requests (say $2.5mm+), HUD may be a fit. We do non-recourse apartment loans under the HUD program but there are others in the market as well.