Rental Property Investor · Harrisburg, PA · Member since 2013 · 161 posts · 62 votes
I am considering a 12 unit multifamily property in my home market of Harrisburg, PA.
I am looking for recommendations for best financing options.
The owner is considering financing it, but until they agree, I am planning as if they will not do so.
The local credit union I use, who is very investor friendly, is unable to lend on properties larger than 4 units right now. Other local lenders I have used recently do not have very favorable terms. This is limiting my options.
I have never utilized the multifamily lending products offered by Fannie, Freddie, etc., so I would be interested to a) hear other BP members' lender recommendations for this sized property and also b) other members' experiences working with Fannie, Freddie, etc.
This is a fully stabilized property, with upside in rent in a B+ location. The loan would be $1M+.
Hey Andrew, for a 12-unit property, traditional lenders like Fannie and Freddie could be great options, especially if it's stabilized with a strong upside. If you're looking for more flexibility, there are also other commercial and multifamily lenders that could work well with your needs. It's always worth comparing rates and terms, as some lenders might be more aggressive with loan-to-value ratios, depending on the location and property condition. Also, a few private lenders or hard money lenders might have some more creative terms for multifamily, especially if you're open to considering that route.
I just moved from that area! I lived in Carlisle for 10 years or so. Below is some info from an available commercial program:
If the DSCR is 1.25+... 75-80% LTV. Min FICO: 720+ Preferred
Documents you would need... Personal Financial Statement Borrower’s Schedule of Real Estate – or- Resume illustrating experience 2-3yrs Personal & Property Tax Returns – All schedules Previous Year and YTD Property Profit & Loss statement w/ detailed expenses Rent Roll w/ detailed lease information Copies of all Leases 3mo. Property Bank Statements Title, Appraisal, Environmental, Survey Reports – If available Purchase Contract
Hey Andrew, for a 12-unit property, traditional lenders like Fannie and Freddie could be great options, especially if it's stabilized with a strong upside. If you're looking for more flexibility, there are also other commercial and multifamily lenders that could work well with your needs. It's always worth comparing rates and terms, as some lenders might be more aggressive with loan-to-value ratios, depending on the location and property condition. Also, a few private lenders or hard money lenders might have some more creative terms for multifamily, especially if you're open to considering that route.
Hi @Andrew Bosworth. I‘ve used Hershey Federal Credit Union for similar sized MFs I have in Harrisburg and Carlisle, PA. Happy to connect you with my contact there. I also just started working with Penn State Federal Credit Union. I can connect you there also. Just let me know.
I am considering a 12 unit multifamily property in my home market of Harrisburg, PA.
I am looking for recommendations for best financing options.
The owner is considering financing it, but until they agree, I am planning as if they will not do so.
The local credit union I use, who is very investor friendly, is unable to lend on properties larger than 4 units right now. Other local lenders I have used recently do not have very favorable terms. This is limiting my options.
I have never utilized the multifamily lending products offered by Fannie, Freddie, etc., so I would be interested to a) hear other BP members' lender recommendations for this sized property and also b) other members' experiences working with Fannie, Freddie, etc.
This is a fully stabilized property, with upside in rent in a B+ location. The loan would be $1M+.
If you need to close quickly I can help! We do a post-closing appraisal on 5+ unit deals, so we can help with a bridge loan for the acquisition and close within a week or two. And then you could take your time shopping for long term financing once you own the property. We can also include rehab financing, if there is any value add opportunities with this deal you have on the table.
I've found that Chase has great deals (almost no closing costs) for 5+. But last I check their requirements for LTV/DSCR was very strict. If you are going to put alot down it would work, or check their latest requirements.
Otherwise, just go through all the local/regional banks. Banks with 2-10 branches are often good. I don't know if credit unions can ever do this stuff?
Please update us with what rates you end up getting quoted.
The Freddie Mac Small Balance Loan (SBL) and Fannie Mae Small Loan multifamily programs could be a good fit for a project like this. Below are summaries of each loan program for future reference.
Freddie Mac Small Balance Loan (Dauphin County, PA)
The term “Mission Driven” is internal Freddie Mac & Fannie Mae terminology that defines whether or not a unit is rented at a “naturally affordable” level. Any unit rented at a level <=80% AMI is considered to be a “Mission Driven” naturally affordable unit.
For example, say you’re buying a 10-unit property consisting entirely of 2-bedroom units in an area where the 80% AMI (Mission Driven) rent cutoff for 2-bedroom unit types is $2500. If 7 units are rented at $2400 (below the 80% AMI Mission Driven rent threshold), and 3 units are rented at $2600 (above the 80% AMI Mission Driven rent threshold), then Freddie & Fannie would consider this a “70% Mission Driven” deal. IE - 70% of total units are rented at levels <=80% AMI.
The higher your “Mission Driven %” (IE - the more units you have rented at levels <=80% AMI) the lower your interest rate will be. The lower your “Mission Driven %”, the higher your interest rate will be.
Note - Mission Driven 80% AMI rents vary by unit type [IE - Studio, 1 Bed, 2 Bed, 3 Bed, etc] and location / zip code. Mission Driven 80% AMI rents also only account for the “tenant-paid portion” of total rent. IE - if any units are receiving Section 8 vouchers or other forms of housing assistance, Freddie & Fannie only look at the tenant paid portion of rent when determining whether or not the unit is Mission Driven @ 80% AMI levels.
For example, let’s stick to the 2-bedroom $2500 Mission Driven 80% AMI cutoff example above. Say you have a 2-bedroom unit rented for $3200, but your tenant is receiving $700/mo Section 8 vouchers. Although the total rent of $3200 is above the $2500 Mission Driven 80% AMI threshold, the *tenant paid rent* is only $2400. $2400 tenant paid rent + $700 S8 voucher rent = $3200 total rent. This unit would qualify as mission driven @ 80% AMI. However, what if this unit was only receiving a $600 S8 voucher? Well in that case - the tenant paid rent portion is $2600 and therefore is above the $2500 cutoff / not Mission Driven.