Multi-Family Loans: Another Great Opportunity

July 29, 2020

Multi-family loans are another great opportunity for many entrepreneurs. Whether you are in the position to purchase an existing multi-family business or embark on construction, many lenders are willing to extend credit to qualified buyers.

As part of our Great Opportunity Series, let’s examine the advantages of multi-family loans at this time.

Why are Multi-Family Loans Great Opportunities?

High Demand: The National Apartment Association recently reported that the U.S. needs about 4.6 million new multifamily units by 2030 to keep up with demand. On a yearly basis, that comes out to about 328,000 new units annually over the next 10 years.

More renters: Millennials are contributing to increased multi-family housing demand. Their high student debt combined with  high home purchase prices make renting more attractive than home ownership. In addition, millennials are interested in more dense housing options featuring downtowns, walkable distances to restaurants and entertainment and a decreased need for automobiles.

Low Interest Rates: Historically low interest rates are a great incentive for business loans in general. The Fed has indicated their interest in maintaining low rates in order to incentivize borrowing and investment. Wise business owners can take advantage of these low rates.

What Elements of a Multi-Family Entity are Most Attractive?

• High occupancy: Current multi-family buildings with nearly full occupancy as well as a manageable turnover are attractive to lenders. However, if this has not been the case in the past, a prospective buyer can demonstrate a management plan to fix any previous problems with a detailed plan to make improvements. Creating a three year financial projection can bolster a borrower’s case. GRP Capital is adept at helping to create these documents in consultation with our clients.

High Local Demand: Multi-family demand is typically high in large urban areas. However, the increased national demand is now taking root in secondary markets and suburban areas, too. Demonstrating the local demand for multi-family housing is a critical component of our communication with potential lenders.

Stability even during recent pandemic: Many multi-family entities have suffered during the recent pandemic. It’s important to determine if the subject property can bounce back and will be resilient through the vagaries of future economic cycles.  Lenders will also want to know the borrower’s management plans to maintain cleanliness and safe practices through the continued post-COVID reality.

If you are interested in any form of multi-family loans, now is the time to act. Read more about other aspects of finding funding in today’s climate here:

Becoming a Better Borrower

What Businesses do Lenders Like Now?

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