100 unit MF loan question

[Dom Chit]

Hi everyone. Can anyone give me guidance on FHA loan options for a 100 unit stabilized complex. Loan would for between 3 to 4 million. How much down is required and how does one go about pursuing this product ? Thanks!

[James Kojo]

@Dom Chit

The loan program I'm guessing you're talking about is called the FHA 223(F) program.

The short and long answer can be found on the HUD website directly: here.

It's easy enough to find lenders who deal with them. Just google "FHA 223(F) lender" or replace "FHA" with "HUD."

I've looked into them but have never actually closed one. Here's what I know:

They offer some of the best terms around. up to 85% leverage with fully amortizing terms up to 35 years. Rates are comparable to what you would see with other agency debt (Fannie/Freddie), which is to say, low.

It sounds like a home run, but here are the downsides.

They take forever to close. I think a typical turn-around time should be about 6-months for a purchase. Unless you find a super patient seller, you'll need to take a bridge loan to close the deal while you're doing the FHA loan. Many FHA lenders will have a bridge-loan product designed specifically for that scenario, so you won't have to pay points twice, and may be able to leverage some of the 3rd party fees.

The documentation requirements for both in the initial closing as well as on-going reporting are onerous. That's part of the reason it takes 6 months to close one. If you have enough scale, you can have "your people" handle that for you. :)

Finally, the fees. It's a very fee heavy program. What my broker told me was that it rarely makes sense to try and take an FHA loan less than 3M, so your deal may be on the lower end of what makes sense.

If you want a couple of referrals to brokers who deal with these loans, PM me. They are generally happy to give you the low-down in exchange for a shot at your business. 

Hope that helps!

James Kojo