The Financing and Acquisition of Multifamily Apartments Explained

Acquiring a multifamily apartment can seem like a huge, complicated decision. And certainly, there’s always going to be an element of difficulty. But with the right guide, even multifamily apartments can seem pretty achievable.

What Counts As A Multifamily Apartment?

First things first: what constitutes a multifamily apartment? Any property with 5 or more dwellings is categorized as an apartment or multi-family housing, hence the name. Anything with fewer dwellings is a one-to-four property, and is a little easier to get a loan for.

How To Qualify

This is the first hurdle. If you’re trying to seek a loan for a multifamily apartment, the lender may consider other factors to assess your suitability as a property owner. They may look at your owning and management experience, as well as your credit score, personal and business tax returns, and two years’ operating statements.

It’s worth noting that if you need a little bit more leeway in your loan, a small bank might be the answer. They may have lower requirements, and be more willing to work around you. There’s also a difference between a standard (or conforming) loan or a portfolio loan, which is a little bit more flexible.

Other Considerations

For a start, it’s important to know whether the property is mixed-use or partially-occupied, as these come with a different set of requirements. It’s also important to decide whether to purchase under your own name or as an LLC, which will limit your liability. For extra protection, a large property may even require a single-asset bankruptcy-remote entity, which will protect the property if the borrower goes bankrupt.

If you hit an unexpected windfall at some point during your loan, you may be tempted to pay the loan off all at once. Most loans will have clauses that hit you with extra clauses if you do this, however, so be aware. Don’t be afraid to negotiate that, however, as there may be some leeway.

Finally, make sure you know what you’re getting into. A property is a big step, and multifamily apartments are a giant leap all of their own. Contact Wexum for business assistance today.


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