Commercial mortgage lenders are dramatically opening up access to credit for multifamily investors.
Multifamily properties have caught their second wind in the US real estate recovery, and aggressive mortgage lenders are now stepping in to fund even more investors eager to expand into this space.
Apartment buildings experienced sizable demand at the beginning of the new upturn as institutional investors sought to scoop up everything possible that offered attractive yields. Then investors of all sizes turned their sights on single family homes. As the economy has been fighting its way back, home prices have rebounded, and investors realize that for a variety of reasons millions of Americans will remain renters for many years to come, multifamily is resurging again.
Multifamily apartment buildings have many clear advantages for investors of all sizes. They often offer a lower cost per unit, can provide higher ROI on improvements, provide built in diversification, and don’t lure independent investors into thinking they should try DIY property management.
The attraction to multifamily apartments is even driving many investors to significant new innovations. In the Northeast we have seen modular apartments popping up in high cost, high density areas. On the West Coast, more builders have dropped building properties for sale to construction luxury townhouse rentals. We’ve also seen some controversial cases of condos being bought up and consolidated so that buildings can be converted back into rentals.
However, individual real estate investors and small investment groups have recently seen mortgage lenders more interested in opening up the doors to single family property investors. The largest funds in the US broke into this arena at the beginning of 2014 with new buy to rent lending arms, and have since opened more conduits to flow their cash through. It has also apparently been a highly intelligent strategy to help cash out many that borrowed their money to buy REOs in bulk early in the crisis, so that they can make good on maturing debt.
Apartment building financing hasn’t been a total desert, but options haven’t been attractive as they could, nor competitive. This may have all changed at the end of August 2014. A new announcement from commercial mortgage lender Rental Home Financing declares new exceptions are being made to enable more investors to fund multifamily apartment building investments.
These new relaxed underwriting guidelines include allowing financing for those with bankruptcy, charge offs and foreclosure, up to 30 year amortization, and credit scores as low as 600.