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?

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.

Erick Moretti · Answer

For Tax deed auctions what I have seen mostly is delayed financing from hard money lenders or private lenders. And depending on the asset type you might use other types of strategy including Bridge/ DSCR. But it has to be review case by case. Happy to help if you have any deals you want to analyze.

Ryan Thomson · Answer

Colorado Springs here, mostly residential but I talk to commercial lenders regularly. What I'm hearing in our market mirrors yours pretty closely: 7-7.5% on 5-year ARMs, 25-year am, 70-75% LTV on new commercial multifamily.

The spread between residential and commercial has gotten ugly. A residential buyer assuming a seller's FHA or VA loan can still land sub-4% rates in my market. I've closed deals where the buyer's payment was $900/month lower than a comparable new loan. Commercial doesn't have that option, which is part of why I'm seeing more investors pivot toward residential small multifamily just to get at the assumable inventory.

On the commercial side, local credit unions are still doing the best rates I've seen, usually 50-75 bps below the big banks. The relationship matters more than the rate sheet. If you're in New England and haven't sat down with a local co-op or credit union, that's worth the hour.

DSCR is the other thing tightening. Lenders are stress testing at the fully amortized rate even on ARMs, so deals that penciled at a 1.25x a couple years ago are getting scrutinized harder at 1.1x today. That's where I'm seeing deals fall apart.

What property type are you looking at? Industrial, mixed-use, straight apartment? The terms vary more than people expect by asset class even within the same market.

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.

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

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

Most Popular Reply

4 Replies