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When applying for a commercial real estate loan, lenders evaluate specific financial metrics to determine whether the loan is a good investment. Two of the most important terms you’ll come across are **Debt Service Coverage Ratio (DSCR)** and **Net Operating Income (NOI)**. These terms help lenders assess the profitability of a property and its ability to repay a loan. Understanding the differences between DSCR and NOI is crucial for commercial real estate investors and borrowers.<h3>Let’s break these terms down and explore why they matter in commercial loan approvals.</h3><figure id="figure-v5h1t90a8bm1txalh9"><img id="v5h1t90a8bm1txalh9" src="https://images.unsplash.com/photo-1520408534979-054bb60c33f9?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwxN3x8Y29tbWVyY2lhbC1sb2Fuc3xlbnwwfHx8fDE3Mjc5OTc1MDR8MA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="two grey escalator" title="two grey escalator" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1520408534979-054bb60c33f9?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwxN3x8Y29tbWVyY2lhbC1sb2Fuc3xlbnwwfHx8fDE3Mjc5OTc1MDR8MA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>---<h3>### **What is Net Operating Income (NOI)?**</h3>**Net Operating Income (NOI)** refers to the amount of income a property generates after all operating expenses are deducted, but before debt payments. This includes income from rents and other property-related sources like parking fees, minus the costs required to operate and maintain the property. These costs include property management fees, repairs, utilities, insurance, and taxes.NOI gives a clear picture of a property’s profitability. It doesn’t account for mortgage payments or other financing costs, making it a direct way to see how much cash the property generates. Lenders use this to determine whether the property is financially healthy and capable of supporting debt payments.---<h3>### **What is Debt Service Coverage Ratio (DSCR)?**</h3>**Debt Service Coverage Ratio (DSCR)** measures a property’s ability to cover its debt obligations. Lenders calculate this to ensure that the property generates enough income to not only cover its operating costs but also pay back the loan.&nbsp;In simple terms, DSCR tells lenders whether a property is making enough money to comfortably pay off its mortgage. The higher the DSCR, the less risky the loan is for the lender. For most commercial loans, lenders prefer a DSCR above 1.25, meaning the property earns at least 25% more than the amount needed for loan payments. This provides a cushion in case of unexpected expenses or changes in the market.<figure id="figure-1n2emf2ms7m1txb76m"><img id="1n2emf2ms7m1txb76m" src="https://media.gettyimages.com/id/889627026/photo/businesswoman-speaking-on-megaphone.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=Al2jGneLeImxk0KTncI6drz_YqpzLmC1J13MCXFdRtE=" alt="Businesswoman speaking on megaphone" title="Businesswoman speaking on megaphone" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/889627026/photo/businesswoman-speaking-on-megaphone.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=Al2jGneLeImxk0KTncI6drz_YqpzLmC1J13MCXFdRtE=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>---<h3>### **Why Lenders Focus on DSCR and NOI**</h3>Both DSCR and NOI play significant roles in the loan approval process, but they focus on different aspects:- **NOI** focuses on profitability. It shows how much money the property brings in after covering operating costs. A high NOI indicates that the property is generating good cash flow, making it attractive to lenders and investors. &nbsp;&nbsp; - **DSCR** focuses on loan repayment ability. It helps lenders determine whether the property’s income is sufficient to cover the loan payments. A DSCR below 1.0 means the property is not generating enough income to meet debt obligations, making it a risky investment for the lender.---<h3>### **Key Differences Between DSCR and NOI**</h3>Though DSCR and NOI are closely related, they serve different purposes:1. **NOI** is about how much money the property makes after covering operating expenses. It gives an idea of the property's overall financial health but doesn't take debt into account. &nbsp;&nbsp; 2. **DSCR** takes the next step by comparing the property’s income (NOI) to its debt obligations. It gives lenders a clearer picture of whether the property can handle its loan payments.<h3>### **How DSCR and NOI Impact Loan Approval**</h3>When a lender evaluates a commercial real estate loan application, they look at both DSCR and NOI to assess risk:- **High NOI, Low DSCR**: A property may generate good income but still have a low DSCR if it is heavily financed with debt. Here, the borrower may need to reduce the loan amount or provide a higher down payment to bring the DSCR to an acceptable level. &nbsp;&nbsp; - **Low NOI, High DSCR**: A property with low income but manageable debt payments may still have a high DSCR. While this is good from a debt repayment perspective, low profitability may raise concerns for lenders. &nbsp;&nbsp; - **Balanced NOI and DSCR**: Ideally, a property should have both a strong NOI and a DSCR above 1.25. This indicates that the property is profitable and can comfortably handle its loan payments, reducing the lender’s risk.---<figure id="figure-xupubsniemm1txdi1v"><img id="xupubsniemm1txdi1v" src="https://images.unsplash.com/photo-1578496479914-7ef3b0193be3?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwxNHx8ZmluYW5jaWFsLWFuYWx5c2lzfGVufDB8fHx8MTcyNzk2NDk2N3ww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="man looking at microscope" title="man looking at microscope" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1578496479914-7ef3b0193be3?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwxNHx8ZmluYW5jaWFsLWFuYWx5c2lzfGVufDB8fHx8MTcyNzk2NDk2N3ww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### **Improving DSCR and NOI for Better Loan Terms**</h3>As an investor, you can take steps to improve your NOI and DSCR, which can help you secure better financing terms:- **Increase Rent or Add New Income Streams**: Boosting rental rates or offering additional services like storage or parking can increase the property’s NOI. &nbsp;&nbsp; - **Reduce Operating Expenses**: Finding ways to lower maintenance costs, negotiate better service contracts, or reduce utilities can improve NOI. &nbsp;&nbsp; - **Refinance Debt**: If interest rates drop, refinancing your loan to lower your payments can increase your DSCR, making the property more attractive to lenders.<figure id="figure-065aby2k2lm1txej9t"><img id="065aby2k2lm1txej9t" src="https://images.unsplash.com/photo-1616587896595-51352538155b?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw4fHxidXNpbmVzcyUyMG1lZXRpbmd8ZW58MHx8fHwxNzI0OTQxMTUxfDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="man and woman sitting on couch using macbook" title="man and woman sitting on couch using macbook" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1616587896595-51352538155b?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw4fHxidXNpbmVzcyUyMG1lZXRpbmd8ZW58MHx8fHwxNzI0OTQxMTUxfDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### **Conclusion: DSCR and NOI – Essential Metrics for Commercial Loans**</h3>Both **Net Operating Income (NOI)** and **Debt Service Coverage Ratio (DSCR)** are key metrics that help lenders assess the financial strength of a commercial property. While NOI focuses on profitability, DSCR evaluates the property’s ability to repay debt. Together, they provide a comprehensive view of the property’s financial performance and risk.Understanding these metrics is crucial for investors seeking commercial loans. By focusing on improving both NOI and DSCR, you can strengthen your loan application and increase the likelihood of securing favorable loan terms.At **Atlantic Commercial Lending**, we can guide you through the process of commercial loan approvals, focusing on these important metrics. Contact us today to learn how we can help you secure the right financing for your next project!

DSCR vs. NOI: Key Metrics in Commercial Loans Explained

aerial photo of people in park at daytime

<h2>Understanding the Basics</h2>Securing a commercial loan for construction can seem complex, but breaking it down into clear steps makes it easier to understand. Here’s a brief overview of how the process works: <figure id="figure-4ma0wij49am1twsyw9" class=""><img id="4ma0wij49am1twsyw9" src="https://images.unsplash.com/photo-1715695938675-87e7c6c498e5?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwyM3x8Y29uc3RydWN0aW9uLXNpdGV8ZW58MHx8fHwxNzI3OTk2ODYwfDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="a building under construction with a crane in the background" title="a building under construction with a crane in the background" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1715695938675-87e7c6c498e5?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwyM3x8Y29uc3RydWN0aW9uLXNpdGV8ZW58MHx8fHwxNzI3OTk2ODYwfDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>### **1. Pre-Approval** Before starting a construction project, you’ll need pre-approval from a lender. During this phase, the lender will review your credit, financials, project plans, and business history. You’ll also need to submit a detailed proposal, including project costs and timelines.---### **2. Loan Application and Underwriting** Once pre-approved, you submit a formal loan application. The lender performs underwriting, evaluating the project's feasibility, market demand, and your ability to repay the loan. Key factors considered include: - **Loan-to-cost (LTC)**: The percentage of project costs the lender is willing to finance. - **Debt service coverage ratio (DSCR)**: Ensuring the project will generate enough income to cover loan payments.---### **3. Construction Loan Terms** Construction loans are typically short-term, lasting 12-36 months, with interest-only payments during construction. Once construction is complete, you’ll need permanent financing to pay off the construction loan or convert it into a long-term loan.---### **4. Draw Schedule** Instead of receiving all the funds upfront, you’ll work with the lender to create a draw schedule. This means funds are released in stages (or "draws") as construction milestones are met. Lenders inspect the project at each stage to ensure progress.<figure id="figure-q7usyn5di7m1twtjds"><img id="q7usyn5di7m1twtjds" src="https://images.unsplash.com/photo-1459499362902-55a20553e082?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw2fHxidXNpbmVzcy1wbGFufGVufDB8fHx8MTcyNzk5Njg2NHww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="three women sitting beside table" title="three women sitting beside table" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1459499362902-55a20553e082?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw2fHxidXNpbmVzcy1wbGFufGVufDB8fHx8MTcyNzk5Njg2NHww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure> ### **5. Loan Conversion or Refinancing** Once the construction is finished, the loan is either converted into a permanent mortgage (if applicable) or refinanced. The terms of this permanent financing depend on the completed project's value and income generation.---### **Conclusion** The commercial loan construction process involves careful planning, phased funding, and securing long-term financing. Understanding each step ensures that your project runs smoothly from start to finish.&nbsp;For help navigating this process, **Atlantic Commercial Lending** is here to assist you with expert advice and financing solutions tailored to your needs. Reach out today!

Navigating the Commercial Loan Construction Process

round gold-colored and silver-colored coin lot

Investing in multifamily properties can be a lucrative venture, but it’s important to understand the different financing options available before diving in. Whether you’re looking to purchase a duplex or a large apartment complex, the right financing can make or break your investment. Here’s an easy-to-understand guide to multifamily property financing.---<h3>### **1. What is Multifamily Property Financing?**</h3>Multifamily property financing refers to loans specifically designed for properties that house multiple families in separate units. These properties can range from small buildings with two units (duplexes) to large apartment complexes with hundreds of units.### **2. Why Multifamily Properties?** Multifamily properties are attractive because they generate rental income from multiple tenants. This means that even if one unit is vacant, the other units continue to generate income. For investors, this provides a reliable stream of cash flow and reduces risk compared to single-family rental properties.---<figure id="figure-nffwf9lmxm1twdlmh"><img id="nffwf9lmxm1twdlmh" src="https://images.unsplash.com/photo-1470181942237-78ce33fec141?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwyMHx8bXVsdGlmYW1pbHktYnVpbGRpbmdzfGVufDB8fHx8MTcyNzk5NjEwNXww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="landscape photography of skyscrapers" title="landscape photography of skyscrapers" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1470181942237-78ce33fec141?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwyMHx8bXVsdGlmYW1pbHktYnVpbGRpbmdzfGVufDB8fHx8MTcyNzk5NjEwNXww&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### **3. Types of Multifamily Property Loans**</h3>There are several financing options available for multifamily properties, depending on the size of the property and the investor's goals:#### **A. Conventional Loans** - **What it is**: Traditional mortgage loans offered by banks and lenders. - **Best for**: Smaller multifamily properties (typically 2-4 units). - **Terms**: Fixed or variable interest rates, with loan terms ranging from 15 to 30 years. - **Requirements**: Good credit score, a down payment (usually 20-25%), and stable income.#### **B. Government-Backed Loans** &nbsp; &nbsp;- **Fannie Mae &amp; Freddie Mac Loans**:&nbsp; &nbsp; &nbsp; &nbsp;- **Best for**: Properties with 5 or more units. &nbsp; &nbsp; &nbsp;- **Terms**: Competitive interest rates, long repayment terms (up to 30 years), and fixed rates. &nbsp; &nbsp; &nbsp;- **Benefits**: Higher loan-to-value (LTV) ratios, lower interest rates, and non-recourse options (meaning the lender can’t go after your personal assets if you default).&nbsp; &nbsp;- **FHA Loans (HUD 221(d)(4) and 223(f))**: &nbsp; &nbsp; &nbsp;- **Best for**: Investors looking for long-term financing for new construction or refinancing multifamily properties. &nbsp; &nbsp; &nbsp;- **Terms**: Up to 40-year amortization, low interest rates, and higher leverage. &nbsp; &nbsp; &nbsp;- **Benefits**: These loans are especially useful for affordable housing projects.#### **C. Commercial Mortgage-Backed Securities (CMBS)** &nbsp; &nbsp;- **What it is**: Loans that are pooled with other commercial mortgages and sold to investors. &nbsp; &nbsp;- **Best for**: Larger apartment complexes. &nbsp; &nbsp;- **Terms**: Typically 5-10 years, but with a balloon payment at the end. &nbsp; &nbsp;- **Benefits**: Competitive interest rates and higher leverage. However, they may have prepayment penalties.#### **D. Bridge Loans** &nbsp; &nbsp;- **What it is**: Short-term loans used to “bridge” the gap between purchasing or refinancing a property and securing permanent financing. &nbsp; &nbsp;- **Best for**: Investors looking to buy, renovate, and stabilize a property before refinancing. &nbsp; &nbsp;- **Terms**: Shorter terms (usually 6-36 months), higher interest rates. &nbsp; &nbsp;- **Benefits**: Flexible and fast but more expensive than permanent financing.<figure id="figure-s8i6cy4aofm1twej9i"><img id="s8i6cy4aofm1twej9i" src="https://media.gettyimages.com/id/1193379861/photo/two-smiling-architects-with-helmets-on-heads-standing-in-building-in-building-process-and.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=FKYarExWP7C0OffKjtT-z-KBS0PMLvsWvKJDD4B7mYU=" alt="Two smiling architects with helmets on heads standing in building in building process and looking at paperwork." title="Two smiling architects with helmets on heads standing in building in building process and looking at paperwork." class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/1193379861/photo/two-smiling-architects-with-helmets-on-heads-standing-in-building-in-building-process-and.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=FKYarExWP7C0OffKjtT-z-KBS0PMLvsWvKJDD4B7mYU=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### **4. Key Terms to Know in Multifamily Financing**</h3>- **Loan-to-Value (LTV) Ratio**: The percentage of the property's value that the bank is willing to lend. For example, if a property is worth $1 million, and the lender offers an 80% LTV ratio, they’ll lend you $800,000. &nbsp;&nbsp; - **Debt Service Coverage Ratio (DSCR)**: This measures your ability to repay the loan with the property’s income. Lenders usually want a DSCR of 1.25 or higher, meaning your property’s net income should be 25% higher than your loan payments.- **Net Operating Income (NOI)**: This is the total income generated by the property (from rent and other sources) minus operating expenses (maintenance, property management, taxes, etc.). It’s a key figure used to determine the property’s profitability.---<h3>### **5. How to Qualify for Multifamily Financing**</h3>To qualify for multifamily loans, lenders will look at several factors: - **Creditworthiness**: A good credit score (typically above 680) is crucial for securing competitive rates. - **Experience**: If you have prior experience managing rental properties, it can make it easier to qualify for larger loans. - **Down Payment**: You’ll need a down payment, which can range from 20 to 30% depending on the type of loan. - **Property Cash Flow**: Lenders will analyze the property’s current or projected cash flow to ensure it can cover loan payments.---<h3>### **6. Steps to Securing Multifamily Financing**</h3>#### **Step 1: Get Pre-Approved** Start by getting pre-approved for a loan to know your budget and understand your financing options. This will also make you more attractive to sellers.#### **Step 2: Choose the Right Loan** Based on the property size and your investment goals, choose the loan that fits best. For small properties (2-4 units), conventional loans may suffice. For larger investments, consider Fannie Mae, Freddie Mac, or FHA loans.#### **Step 3: Analyze the Deal** Carefully analyze the potential income and expenses to ensure the property will generate enough cash flow to cover your mortgage, operating costs, and provide a profit.#### **Step 4: Close the Loan** Once you’ve found the right property and financing, work with your lender to finalize the loan and close the deal.<figure id="figure-phxn1sslnqm1twkbwy"><img id="phxn1sslnqm1twkbwy" src="https://images.unsplash.com/photo-1520333789090-1afc82db536a?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHwyNHx8YnVzaW5lc3MlMjBsb2FufGVufDB8fHx8MTcyMzgyMTA3NHww&ixlib=rb-4.0.3&q=80&w=1080" alt="woman in white shirt using smartphone" title="woman in white shirt using smartphone" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionX="undefined" data-positionY="undefined" data-fullWidth="false"/></figure>---### **Conclusion: Simplifying Multifamily Financing** Multifamily property financing doesn’t have to be complicated. By understanding your options and key terms like LTV, DSCR, and NOI, you can make an informed decision that aligns with your investment goals. Whether you’re a first-time investor or a seasoned professional, the right financing strategy can help you grow your portfolio and achieve long-term success.Remember, **Atlantic Commercial Lending** is here to help you find the best loan options tailored to your multifamily investment needs. Reach out to us today for expert guidance!

Navigating Multifamily Property Financing: A Guide for Investors

<h2>Understanding Commercial Apartment Financing</h2>Investing in commercial apartment buildings can be a lucrative venture, but securing the right financing is crucial for success. Whether you're looking to purchase, refinance, or renovate a property, understanding the available loan options can help maximize your returns and minimize risks.<figure id="figure-caft3o8iehm0v8dc1u"><img id="caft3o8iehm0v8dc1u" src="https://images.unsplash.com/photo-1664833189203-cbd564954b11?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw4fHxtdWx0aWZhbWlseSUyMGhvdXNpbmd8ZW58MHx8fHwxNzI1ODk5MDc4fDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" alt="a few buildings with a park in front of them" title="a few buildings with a park in front of them" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://images.unsplash.com/photo-1664833189203-cbd564954b11?crop=entropy&amp;cs=tinysrgb&amp;fit=max&amp;fm=jpg&amp;ixid=M3wyNjI5NjF8MHwxfHNlYXJjaHw4fHxtdWx0aWZhbWlseSUyMGhvdXNpbmd8ZW58MHx8fHwxNzI1ODk5MDc4fDA&amp;ixlib=rb-4.0.3&amp;q=80&amp;w=1080" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### Key Loan Types for Commercial Apartments</h3>1. **Fannie Mae and Freddie Mac Loans** &nbsp; &nbsp; &nbsp;These government-backed loans are specifically designed for multifamily properties. They offer competitive interest rates and longer terms, making them an attractive option for investors looking for stability. Fannie Mae’s and Freddie Mac’s multifamily loan programs also include fixed and adjustable-rate options.2. **CMBS Loans (Commercial Mortgage-Backed Securities)** &nbsp; &nbsp; &nbsp;CMBS loans are packaged into securities and sold to investors. They typically offer low-interest rates and are available for larger multifamily properties. However, they come with strict terms and can be less flexible if you need to modify or prepay the loan.3. **SBA 504 Loans** &nbsp; &nbsp; &nbsp;These loans are ideal for smaller multifamily investments. They offer low, fixed-rate financing for long-term investment, allowing up to 90% financing of the property cost. The SBA 504 loan requires a partnership with a Certified Development Company (CDC), but it can be a great option for owner-occupied buildings.4. **Bridge Loans** &nbsp; &nbsp; &nbsp;For investors looking to quickly acquire and reposition a multifamily property, bridge loans offer short-term financing. These loans can be used for renovation or to stabilize a property before securing permanent financing.<figure id="figure-oci807w1tqm0v8ecz9"><img id="oci807w1tqm0v8ecz9" src="https://media.gettyimages.com/id/1391594880/photo/blue-arrows-pointing-up-mock-up-success-and-business-growth-template.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=XhMtBJ7G_lB-bFQp3iDSvX8pBnmmuvQwB6lZDLMVP6g=" alt="Blue arrows pointing up mock up, success and business growth template" title="Blue arrows pointing up mock up, success and business growth template" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/1391594880/photo/blue-arrows-pointing-up-mock-up-success-and-business-growth-template.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=XhMtBJ7G_lB-bFQp3iDSvX8pBnmmuvQwB6lZDLMVP6g=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>5. **HUD 223(f) and 221(d)(4) Loans** &nbsp; &nbsp; &nbsp;HUD loans are backed by the U.S. Department of Housing and Urban Development and are designed to support affordable housing. The 223(f) loan is great for refinancing or purchasing existing properties, while the 221(d)(4) loan covers construction and substantial rehabilitation projects.### Loan-to-Value Ratios and Terms Most commercial apartment loans come with a Loan-to-Value (LTV) ratio ranging from 70% to 80%. Interest rates can vary, but range between 4% and 6%, with loan terms of 5 to 30 years depending on the loan product.<figure id="figure-ajx7ll0hm0v8f5tb"><img id="ajx7ll0hm0v8f5tb" src="https://media.gettyimages.com/id/1525359356/photo/businessman-presenting-documents-at-a-business-meeting.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=I8stgJSh7y_HwBPgbQmnGe_Y7mej4_607Z3fQyzeFeg=" alt="Businessman presenting documents at a business meeting" title="Businessman presenting documents at a business meeting" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/1525359356/photo/businessman-presenting-documents-at-a-business-meeting.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=I8stgJSh7y_HwBPgbQmnGe_Y7mej4_607Z3fQyzeFeg=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>### Conclusion When exploring financing options for your commercial apartment investment, working with an experienced broker can make all the difference. **Atlantic Commercial Lending**, a licensed commercial mortgage brokerage (NMLS ID #2429887), can help you navigate the complexities of commercial apartment loans and secure the best financing for your needs.

Unlocking Financing for Commercial Apartments: A Guide for Investors

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For financing multifamily properties, investors often encounter two popular options: **Fannie Mae loans** and **HUD loans**. While both programs provide valuable support for multifamily investors, they have distinct characteristics that can influence which loan is the best fit for your investment strategy. Here’s a breakdown of the differences between these two multifamily loan options.<figure id="figure-6q197kv94m0v7xcd0"><img id="6q197kv94m0v7xcd0" src="https://media.gettyimages.com/id/2161956084/photo/3d-binoculars-with-house.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=lqbJEQgrdImm5o2rvsiawNoHQ8kMKXvbgaXalVW5WXw=" alt="3D Binoculars with House" title="3D Binoculars with House" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: undefined undefined;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/2161956084/photo/3d-binoculars-with-house.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=lqbJEQgrdImm5o2rvsiawNoHQ8kMKXvbgaXalVW5WXw=" data-mce-style="aspect-ratio: 16/9; object-position: undefined undefined;"></figure><h3>### 1. **Purpose and Focus**</h3>- **Fannie Mae Multifamily Loans**: &nbsp; &nbsp; Fannie Mae’s loan programs are primarily designed to provide liquidity for conventional multifamily properties, including affordable housing, senior housing, student housing, and manufactured housing. The goal is to promote stability and affordability in the housing market by working with private lenders who issue loans backed by Fannie Mae.- **HUD Multifamily Loans**: &nbsp; &nbsp; HUD loans, especially the popular **HUD 221(d)(4)** and **HUD 223(f)** programs, are backed by the U.S. Department of Housing and Urban Development. These loans are aimed at encouraging affordable housing projects. They focus on properties that meet certain affordability criteria, making them a popular option for projects serving low- to moderate-income tenants.<h3>### 2. **Loan Programs**</h3>- **Fannie Mae**: &nbsp; &nbsp; Fannie Mae offers a variety of loan products for different property types and investment strategies, such as &nbsp; - **Fixed-rate and adjustable-rate loans** &nbsp; &nbsp; - **Small loans for properties with 5 to 50 units** &nbsp; &nbsp; - **Affordable Housing Preservation loans** &nbsp; &nbsp; - **Green financing options** for energy-efficient upgrades &nbsp;- **HUD**: &nbsp; &nbsp; HUD’s most commonly used loan programs include: &nbsp; - **HUD 221(d)(4)**: Designed for construction or substantial rehabilitation of multifamily properties. &nbsp; - **HUD 223(f)**: Used for the refinancing or acquisition of existing multifamily properties. &nbsp; - **HUD 232/223(f)**: Specifically for senior housing and healthcare facilities.<figure id="figure-t4npvw05km0v836yz"><img id="t4npvw05km0v836yz" src="https://media.gettyimages.com/id/1644622448/photo/new-houses-construction-residential-house-development.jpg?b=1&s=2048x2048&w=0&k=20&c=yyUw5uLXQSI5_oBrIgpduR14Xc-98DPfgpvsTmWHIcY=" alt="New houses construction. Residential house development" title="New houses construction. Residential house development" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionX="undefined" data-positionY="undefined" data-fullWidth="false"/></figure><h3>### 3. **Loan Terms and Amortization**</h3>- **Fannie Mae Loans**: &nbsp; &nbsp; Fannie Mae loans typically have shorter terms, often ranging from 5 to 30 years, with amortization schedules also capped at 30 years. These loans offer both fixed and adjustable-rate options, providing flexibility based on your investment horizon.- **HUD Loans**: &nbsp; &nbsp; HUD loans stand out with their longer terms and amortization periods, often reaching 35 years for **HUD 223(f)** and up to 40 years for **HUD 221(d)(4)**. This longer term allows for lower monthly payments, which can be beneficial for cash flow.<h3>### 4. **Interest Rates**</h3>- **Fannie Mae Loans**: &nbsp; &nbsp; Interest rates for Fannie Mae loans are competitive and can range from 4% to 6%, depending on the loan type, property characteristics, and borrower’s credit profile. Fixed-rate and adjustable-rate options are available.- **HUD Loans**: &nbsp; &nbsp; HUD loans typically offer lower interest rates due to the federal government’s backing. Rates for HUD loans can often fall below 4%, which can make them attractive for long-term financing.<h3>### 5. **Processing Time**</h3>- **Fannie Mae Loans**: &nbsp; &nbsp; Fannie Mae loans have a faster processing time compared to HUD loans. From application to closing, Fannie Mae loans can often close in 45 to 60 days.- **HUD Loans**: &nbsp; &nbsp; HUD loans, while offering longer terms and lower rates, often require a longer and more detailed underwriting process. It can take 6 to 12 months to close a HUD loan, especially for the **HUD 221(d)(4)** program because of its construction component.<figure id="figure-459t5pjsy2m0v7yl37"><img id="459t5pjsy2m0v7yl37" src="https://media.gettyimages.com/id/1401142442/photo/african-woman-looking-at-the-city-view.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=eEAbTUZJcRUBz_a3MUkMHTln6aI6v0vAVVvrPLSAMM4=" alt="African woman looking at the city view" title="African woman looking at the city view" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/1401142442/photo/african-woman-looking-at-the-city-view.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=eEAbTUZJcRUBz_a3MUkMHTln6aI6v0vAVVvrPLSAMM4=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>### 6. **Affordability and Property Requirements**</h3>- **Fannie Mae Loans**: &nbsp; &nbsp; While Fannie Mae supports affordable housing, the program does not have the same stringent affordability requirements as HUD. Fannie Mae loans can be used for both market-rate and affordable multifamily properties.- **HUD Loans**: &nbsp; &nbsp; HUD loans are specifically designed to support affordable housing. They often come with affordability restrictions, requiring a certain percentage of units to be reserved for low- to moderate-income tenants. These restrictions typically last for the life of the loan.<h3>### Conclusion</h3>Choosing between a **Fannie Mae multifamily loan** and a **HUD multifamily loan** depends on your property type, investment goals, and timeline. Fannie Mae loans offer flexibility and speed, making them ideal for conventional multifamily properties. On the other hand, HUD loans provide long-term, low-interest financing, particularly suited for affordable housing projects.If you're unsure which loan is best for your multifamily investment, consult with **Atlantic Commercial Lending**, a licensed commercial mortgage brokerage (NMLS ID #2429887), to guide you through the process and secure the right financing for your project.

Understanding the Difference Between Fannie Mae and HUD Multifamily Loans

smiling man standing between brown concrete buildings at daytime

Investing in distressed properties can be a lucrative opportunity, but securing financing for these types of assets often comes with higher costs. Commercial mortgage rates for distressed properties typically reflect the increased risk associated with these investments. Here's a brief guide to help you understand what to expect.<figure id="figure-ry5me7djodm0fkkxtl"><img id="ry5me7djodm0fkkxtl" src="https://media.gettyimages.com/id/2159363633/photo/obstructed-from-opportunity.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=rT0U5Vh6YLYEorsp65hnTzZGZc7Th2Fgu8Y1OU4n9rw=" alt="Obstructed From Opportunity" title="Obstructed From Opportunity" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/2159363633/photo/obstructed-from-opportunity.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=rT0U5Vh6YLYEorsp65hnTzZGZc7Th2Fgu8Y1OU4n9rw=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure><h3>#### 1. **What Are Distressed Properties?**</h3>Distressed properties are real estate assets that are either in foreclosure, facing foreclosure, or in poor physical condition. These properties often sell below market value, making them attractive to investors looking for bargains. However, the condition and financial history of these properties can make obtaining financing more challenging.<h3>#### 2. **Why Are Rates Higher?**</h3>Lenders view distressed properties as higher-risk investments due to potential issues like: - **Poor Condition:** Properties that require significant repairs may be more difficult to lease or sell. - **Financial Instability:** Foreclosure or near-foreclosure status indicates previous financial difficulties, which can make lenders wary. - **Market Uncertainty:** The future value of distressed properties can be uncertain, especially in volatile markets.As a result, interest rates for commercial mortgages on distressed properties are generally higher, ranging from 8% to 12%, depending on the lender and the specific risks involved.<figure id="figure-jajj7gqo1m0fko78a"><img id="jajj7gqo1m0fko78a" src="https://media.gettyimages.com/id/1193379861/photo/two-smiling-architects-with-helmets-on-heads-standing-in-building-in-building-process-and.jpg?b=1&s=2048x2048&w=0&k=20&c=FKYarExWP7C0OffKjtT-z-KBS0PMLvsWvKJDD4B7mYU=" alt="Two smiling architects with helmets on heads standing in building in building process and looking at paperwork." title="Two smiling architects with helmets on heads standing in building in building process and looking at paperwork." class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionX="undefined" data-positionY="undefined" data-fullWidth="false"/></figure><h3>#### 3. **Financing Options**</h3>While traditional lenders may hesitate to finance distressed properties, several options exist: - **Hard Money Loans:** These short-term loans are often used for distressed properties but come with higher rates, typically 10% to 15%. - **Bridge Loans:** Another short-term option, bridge loans can provide quick financing with rates around 8% to 12%. - **Rehabilitation Loans:** Some lenders offer specialized loans for properties in need of renovation, with rates that reflect both the risk and the projected increase in property value.<h3>### Conclusion</h3>Investing in distressed properties can offer significant returns, but it's important to be prepared for higher commercial mortgage rates. By understanding the risks and exploring various financing options, you can make informed decisions that align with your investment goals. For expert assistance in navigating the financing landscape for distressed properties, consider working with Atlantic Commercial Lending, a licensed commercial mortgage broker, to secure the best possible terms.

Atlantic Commercial Lending NMLS#2429887

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