Multifamily Rehab Loans 101
If you’ve invested in a multifamily property that needs some TLC, a multifamily rehab loan is an excellent way to fund the deal. Whether you’re looking to renovate a duplex or a multifamily site with hundreds or even thousands of apartments, a multifamily hard money rehab loan can help cover the costs in the best way possible.
What Is a Multifamily Rehab Loan?
A multifamily rehab loan is a short-term loan specifically for the rehab, renovation or remodel of a multifamily property. This includes duplexes, apartment buildings, condominium complexes, student housing and mixed-use development sites. Essentially, a multifamily rehab loan works as a bridge loan, allowing you to renovate a property without using your own money before selling or refinancing with a longer-term option.
The Ins and Outs of Multifamily Rehab Loans
Here’s what you need to know about securing a hard money rehab loan for a multifamily property:
● Multifamily rehab loans are easy to secure. Because multifamily investments are considered less risky than other property purchases, getting a rehab loan for a multifamily property can be surprisingly easy. Generally, financing for multifamily properties is based on the property, as opposed to your own financial situation. This means that you’ll be able to invest in a multifamily renovation property even if you have a less-than-perfect credit score.
● There are many different options available. Since multifamily properties are so varied in terms of their size and scope, there are many different multifamily rehab loans on offer. Accordingly, you’ll need to really do your research and shop around to ensure that you’re choosing a hard money renovation loan that delivers the best rates and terms. This will pay off in the long term. For instance, if you’re choosing a loan that delivers the lowest rates or requires minimal or no down payment, you’ll have extra funds to invest in things that are going to add value to your property. By spending more on the fit out of each premise in a way that will really appeal to the tastes and lifestyles of prospective renters or purchasers, you’ll be increasing the potential of your rental income or sale price.
● You might only need to repay interest. Often, multifamily rehab loans only require you to make interest payments while the project is underway. You’ll then need to repay or refinance the full amount once you’ve finished renovating your multifamily property.
● Interest rates are likely to be high. Due to the risky nature of the investment, you’ll probably find that interest rates for your multifamily rehab loan are high. Since the loan will only be short-term to cover the duration of the rehab, you’ll be able to refinance with a longer-term option that offers lower rates once the project is complete.
● You will probably only need a minimal down payment. Another factor that makes a multifamily rehab loan an affordable option – despite the high interest rates – is the down payment requirement. Many investment property rehab loans require minimal down payments and some don’t require any at all. This means you can cover 100% of the project with financing.
● Lending criteria is varied. The requirements of a multifamily hard money rehab loan vary greatly between lenders, however most private multifamily rehab lenders will consider similar factors when making their decisions such as:
o How many units are in the multifamily property
o The occupancy rate of the property
o Your experience with multifamily property investment
If you’re ready to start talking about your options or want to apply for a multifamily hard money rehab loan, RehabLend is ready to help. We offer multifamily rehab loans with great terms, rates and conditions across a range of situations. Contact us at any time and one of our friendly agents will be in touch as soon as possible.