What are financing terms like in your area for commercial multifamily w/ hikes?

Question

Given the interest rate hikes, in my area, new england (MA, RI, CT, NH), I am seeing 7% interest, 25 to 30 year ARMs, 75% LTV for down payment/construction funds. This is financing from my local credit unions / banks at 5, 7, or 10 year ARM. At the beginning of the year, I was seeing around 6% interest. Curious, what are you seeing in your area for financing of commercial multifamily?

Mark Updegraff · Answer

One recent local-bank indication I’ve been underwriting around in Rochester was roughly 6.75%, 30-year amortization, 5-year balloon and 1.20x DSCR.

I wouldn’t call that “the market” off one quote, but it’s a useful reference point.

The bigger spread I’m seeing isn’t always the headline rate. Leverage, recourse, amortization, covenants and how the bank underwrites NOI can change the deal more than 25–50 bps.

Two loans can both be “mid-6s” and still produce very different economics.

Igor Ganapolsky · Answer

I'm in Broward County, FL and my experience is a bit different since I mostly buy at tax deed auctions where you need cash or hard money to close fast. Traditional financing doesn't really work in that space because you typically have 24-48 hours to close after the auction.

For the auction properties I've been looking at, hard money lenders in South Florida are running around 10-12% interest with 2-3 points origination, and they'll typically lend up to 70% of purchase price if the after-repair value makes sense. The key is having a solid exit strategy because these loans are short-term (6-12 months usually).

Once I rehab and the property is stabilized, then I can refinance into more traditional financing if I'm holding it as a rental. But most of the time I'm doing a quick flip to a retail buyer, so the financing cost is just part of the rehab budget.

In the Broward market specifically, I've been seeing that buying at 40-50% of ARV at auction gives enough margin to cover the hard money costs and still have a profitable flip. The interest rate environment has definitely made traditional buy-and-hold financing tougher, but for the auction strategy the math still works if you're disciplined about your purchase price.

Curious if anyone in the thread has found creative financing options for auction properties beyond hard money? I've heard some people use self-directed IRA funds or partner with private money lenders, but haven't explored those routes yet.

What are financing terms like in your area for commercial multifamily w/ hikes?

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