Need input for financing - built-to-rent multifamily (highest leverage possible)
Member since 2026 · 3 posts · 1 vote
Need input for financing - built-to-rent multifamily (highest leverage possible)
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes@John Smith Land acquisition and entitlements is generally reserved for the lowest leveraged loans so the notion you are seeking financing at 90% is misaligned with the market realities.
More concerning, the unit count could fluctuate between 6-20 units depending on the size of the loan you can secure. This tells me you're way over your head with this project. According to the base zoning or achievable zoning relief there is a sweet spot unit count that should always be pursued. This sweet spot unit count balances efficiencies, spreads fixed costs such as land acquisition and some soft costs most notably many civil engineering costs associated with the project. Other factors to be balanced include building and unit layouts. Building the number of apartments units, you can afford to finance is one of the most half-baked approaches I've personally seen.
Additionally, vertical construction costs are high and MEP's, and other costs associated with kitchens and baths are some of the line items that have experienced the most severe price increases. Therefore, it's very difficult to comprehend building a structure consisting entirely of studio apartment units when the building is made up of a concentration of some of the costliest line items.
I believe you need to bring in a development partner who has experience with land development in your market and use the opportunity to learn.
8 Replies
- 2moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
If you have similar experience, you might be able to get financing for the project however your leverage ask may not be realistic with the current financing landscape for multifamily.
LuxePrivate Investments LLC 572 Reviews- Member since 2026 · 3 posts · 1 vote2mo
Quote from @Erik Estrada:
If you have similar experience, you might be able to get financing for the project however your leverage ask may not be realistic with the current financing landscape for multifamily.
I have much more leniant terms and bunch of goverment support programs available in EU which could make it possible.
The question I have is: what structure would you suggest instead? I'd love to hear more variants to tweak the current hypothetical stack.
- 2moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Might be something a private money lender or JV partner can entertain
LuxePrivate Investments LLC 572 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2mo
Have you spoken to a lender already? I don't know any lender that would only allow 10% down to cover land and soft cost.
The other issue we're going to run into is you're building all studio apartments, and those are going to be extremely challenging to get permanent financing on.
If you want this to become a reality - your best bet is to bring on an equity partner as it doesn't appear you have the funds to actually get this built or financed
7e investments53 Reviews - 2moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@John Smith Land acquisition and entitlements is generally reserved for the lowest leveraged loans so the notion you are seeking financing at 90% is misaligned with the market realities.
More concerning, the unit count could fluctuate between 6-20 units depending on the size of the loan you can secure. This tells me you're way over your head with this project. According to the base zoning or achievable zoning relief there is a sweet spot unit count that should always be pursued. This sweet spot unit count balances efficiencies, spreads fixed costs such as land acquisition and some soft costs most notably many civil engineering costs associated with the project. Other factors to be balanced include building and unit layouts. Building the number of apartments units, you can afford to finance is one of the most half-baked approaches I've personally seen.
Additionally, vertical construction costs are high and MEP's, and other costs associated with kitchens and baths are some of the line items that have experienced the most severe price increases. Therefore, it's very difficult to comprehend building a structure consisting entirely of studio apartment units when the building is made up of a concentration of some of the costliest line items.
I believe you need to bring in a development partner who has experience with land development in your market and use the opportunity to learn.
- Member since 2026 · 3 posts · 1 vote2mo
Quote from @Stuart Udis:
@John Smith Land acquisition and entitlements is generally reserved for the lowest leveraged loans so the notion you are seeking financing at 90% is misaligned with the market realities.
More concerning, the unit count could fluctuate between 6-20 units depending on the size of the loan you can secure. This tells me you're way over your head with this project. According to the base zoning or achievable zoning relief there is a sweet spot unit count that should always be pursued. This sweet spot unit count balances efficiencies, spreads fixed costs such as land acquisition and some soft costs most notably many civil engineering costs associated with the project. Other factors to be balanced include building and unit layouts. Building the number of apartments units, you can afford to finance is one of the most half-baked approaches I've personally seen.
Additionally, vertical construction costs are high and MEP's, and other costs associated with kitchens and baths are some of the line items that have experienced the most severe price increases. Therefore, it's very difficult to comprehend building a structure consisting entirely of studio apartment units when the building is made up of a concentration of some of the costliest line items.
I believe you need to bring in a development partner who has experience with land development in your market and use the opportunity to learn.
Noted. This is my first ever project so I am over my head for a single unit as well but I am determined to see it through.
I will have to research entitlements loan terms available for me better. But I do have access to ALTUM and other gov programs. Some of which include 0% +6M EURIBOR loans in area where I am located and 10% down business development starting funds up to 250k (which could cover my soft costs) as well as other programs.
As for unit mix - I am in a uniqe position:
in the area that I will build in max rent most people will be able to afford is 600eur, construction cost is 1800-2200eur/m^2, I will interview other developers to know a more precise figure later in the process but I use 2000eur/m^2 in my calculations. For development cost to not exceed my ABV (which I believe banks will take into account when lending) I can't build units larger than ~40m^2, which works out because the demand for studio is large as it's a university city.
Next fact - plots are usually 500 or 1000m^2 with 30% build density max and zoning is absolutely amazing with most of city allowing mixed use 4-6 story buildings with no rezoning needed (in EU zoning situation is much more welcoming). In short - I am not limited by zoning. In theory on 300m^2 buildable area (15% for corridors and walls so 255m^2) I can do 7x 36m^2 studios. In 5 floors that's 35 units.
Super rough cost calculations: 3,149,400eur to build (including soft costs (22%) and land price (60k) +15k holding/stabilizing costs) optimal unit mix.
I don't believe as a first time developer I will get this much lent as well as I don't plan on owning that many units in the area. It is sub-optimal from land utilizatio standpoint but fits the situation and the vision in my oppinion.
And what IS available for me debt wise will probably let me build ~14 units Which could nicely fit in 2 floors either in an apartment complex or in side-by-side duplexes, reducing my vertical construction which as you pointed out is high cost right now.
With very little cash equity I can personally bring I don't see value/inscentive I can provide to a development partner.
Sorry if the tone seams dismissive. I am actively noting everything here.
I guess a clearer question to ask would be:
Is the loan structure of 1 loan for land + soft costs and another loan for construction (that gets refied into amortized) a viable structure or do developers allways cover land/soft costs with their or partner equity?
- Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes2mo
@John Smith Regarding your loan structure question: At least in the U.S., two loans like you mentioned would be difficult as each lender would want a 1st lien position.
- Banker · MA · Member since 2026 · 120 posts · 31 votes1mo
The attorney above is right that land acquisition loans at 90% LTV are almost impossible to find from conventional sources, so that part of the stack needs a reality check. Most lenders will go 50-65% LTV on raw or entitled land, sometimes stretching to 70% on a site that's fully entitled with permits in hand. If you're expecting institutional or bank money to cover 90% of land, that's where the plan breaks down.
That said, the two-loan concept you're describing is the right general shape for a built-to-rent ground-up project. The more realistic version of it looks like this: you buy land with your own equity or a private/hard money bridge at reasonable LTV, then go to a construction lender with the full package (entitlements, plans, permits, GC contract, pro forma) and get a construction-to-permanent loan or a standalone construction loan you convert later. On ground-up multifamily, construction lenders typically want to see 20-30% total project cost in equity, not just 10%, and they're underwriting your experience and your GC's experience just as hard as the numbers.
On the DSCR refi after stabilization: that part of the plan is solid. Once the property is stabilized at 90%+ occupancy for 90 days or so, a DSCR loan on a 6-20 unit building can be structured around the income the property actually generates. I've worked through deals where the refi into a long-term DSCR product was the cleaner exit from a construction loan than going back to a traditional bank, especially on smaller multifamily where community banks are the main construction lenders and they often require a takeout commitment upfront.
The unit count question is a separate issue from financing. The attorney is right that letting debt capacity drive unit count is backwards. You want entitlements and site efficiency to drive unit count, then back into how much equity you actually need. On a 6-unit vs. a 20-unit, your cost-per-door, land cost spread, and financing options are genuinely different products, so it's worth getting that number locked down before you approach lenders.
Other high-leverage tools worth looking into: SBA 504 can finance commercial real estate at 10% borrower equity for owner-occupied scenarios (not applicable here), but some investors explore EB-5 or local economic development programs for ground-up affordable or workforce housing that can layer in subordinate debt. Those paths are slow and complex. The more accessible lever is finding a local community bank that does in-house construction lending and has an appetite for your market, then pairing that with a strong equity raise if your own capital is short of the 20-25% threshold.
After 31 years in the mortgage business, the projects I've seen go sideways on construction financing usually failed at the capital stack assembly stage, not the construction stage. Getting a lender's term sheet before you're fully entitled is worth doing just to understand what equity they'll actually require from you.
Jim Driscoll
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