multifamily financing, 5 plus units

8 Replies

Good afternoon. I am in the process of finishing construction plans on a really cool industrial design loft multiplex. Very edgy. and low maintenance design. I have worked out the initial financing for land acquisition and construction with two investors who will put up approx $250k (total) and I will get a $500k private/hard money for the the balance.  What I am looking for is the best re-financing option once completed and rent stabilized.  Of course I will visit some of my local banks, but I remember listing to some podcasts where there was some type of Fanny or Freddie loans specific for 5+ units.  Anyone have any info on that?  Your responses are greatly appreciated.   I am hoping to get this process nailed down as I would like to start building 10 - 20 units per year for the next 5 years.  Thanks again.  Pete

Fannie and Freddie do not allow STR normally. Don't go sailing along under false pretenses.


Doing hard money is insane and expanding as rapidly as possible in STRs is insane. Anything goes wrong, you are in the crapper. 

But some idiot broker or lender will happily tell you what a great idea you have and they can help you... 

Why not just post "I don't know what I am doing, but I want to go bankruptcy asap. How do I do this?" Sheesh. 

@Pete Torrez over 4 units you’d have to refinance using a commercial loan. I’ve had good luck with local credit unions on commercial loans. Maybe approach a few ahead of time to understand their appetite and get their thoughts on it. They typically want a rent roll with signed leases in place for the financing so you’ll need to build and fill it before refinancing.

What’s the rate you’re getting on the hard money? What do you think the property will appraise for once it’s all done?

@Jonathan Bombaci this is a 7 unit project, projected rent is $1500/unit+ with a conservative NOI of $88k. At a 6 cap that give me a value of just under $1.5M with a refinance loan of $900k(ish) so the LTV is very good. I can get 6-10% HMLs, I'm using 8% for this project since were coming in with a bunch of equity. I see that both Freddie and Fannie mention the multi family loans on their site but I remember specifically someone on a BP podcast saying this was the way to go for 5+ units, but I can find my notes.

I’m pretty sure Fannie and Freddy only do loans up to 4 units but I maybe mistaken. 

@Ken Latchers , we will not be doing STR on this project initially. However once rent stabilized and refinanced I may take a unit or two and do STR when a unit become vacant. I recently purchased a tri-plex, with 100% hard money, did about $20K in improvements and turned one of the units into STR. It is 110 degrees here in Tucson now and we are already killing it with the STR, we will do an extra 80-100% income on that unit in the next year over LTR. Back two units are long term, so I like the model as long as STR is viable. The key for me is to use LTR income as my evaluation for the the project and if I can beat that with STR, why not.

I don't see how hard money lending is any more risky that conventional financing, yes the rates are higher but the result is the same if you default.  I have personally "flipped" over 200 homes in my market with almost all hard money or investor/partner money.  Although I don't do the smaller flips anymore, I have just completed two tear downs financed the same way and sold the first one for $1.45M in two days and the second goes on the market next week.

I am a fan of hard money lending, but the same principles apply and it is not wise to be over leveraged at anytime.

Originally posted by @Pete Torrez :

Good afternoon. I am in the process of finishing construction plans on a really cool industrial design loft multiplex. Very edgy. and low maintenance design. I have worked out the initial financing for land acquisition and construction with two investors who will put up approx $250k (total) and I will get a $500k private/hard money for the the balance.  What I am looking for is the best re-financing option once completed and rent stabilized.  Of course I will visit some of my local banks, but I remember listing to some podcasts where there was some type of Fanny or Freddie loans specific for 5+ units.  Anyone have any info on that?  Your responses are greatly appreciated.   I am hoping to get this process nailed down as I would like to start building 10 - 20 units per year for the next 5 years.  Thanks again.  Pete

Freddie Mac offers commercial loans as well. The few companies that are approved to offer their commercial loans typically won’t do anything loan wise for under 1mm. If you need a referral send me over a PM.


I don’t do commercial properties yet, but talking with local banks is great advice!  I have a friend that works at a local credit union & her job is to find people to give loans to. You’d be surprised how challenging that can be for a good bank.  

My advice is to talk to as many banks as possible & ask other investors. For the future work on private money. Last tip is to follow @Rod Khleif as he’s an expert in multi family & discusses how to raise capital. 

Best of luck! 

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