When it's time to finance your multifamily property, it's easy to default to the obvious—banks. They've long been the traditional go-to for multifamily loans. But today’s lending landscape is far more dynamic, offering several alternative routes that could better support your financial goals. Knowing what's out there is crucial—you could end up securing better terms or avoiding unnecessary risk simply by looking beyond the conventional.
There are five main options available to you:
1. Traditional Banks: Reliable, Local, and Familiar
Banks are often the first stop for many investors—and for good reason. They’ve been financing multifamily deals across the U.S. for decades. If you prefer working with a local institution, and you're comfortable with personal guarantees (recourse lending), a bank loan might be the right fit.
That said, it’s important to understand the constraints. Banks typically lend within certain regions and may impose borrower exposure limits. If you’re okay with those boundaries and value a familiar relationship with your lender, this remains a viable path.
2. Fannie Mae & Freddie Mac: Stable, Scalable, and Surprisingly Accessible
You might know them as “the agencies,” but Fannie Mae and Freddie Mac are government-sponsored entities (GSEs) that play a key role in financing housing nationwide—including smaller multifamily properties.
Their loan offerings come with significant advantages: long terms (5–30 years), 30-year amortization, non-recourse structures, and both fixed and floating rate options. They also serve a broad range of property types, from affordable housing to manufactured homes and mixed-use buildings.
Here’s a big differentiator: while other lenders may tighten their purse strings in uncertain times, the agencies are required to stay active in the market—offering a layer of reliability others might not.
To work with them, you’ll need to go through an approved agency lender. Top-tier firms like Greystone can access these programs. If your property fits the criteria, agency loans can be an excellent choice.
3. Life Insurance Companies: Conservative but Attractive for Quality Assets
Life insurance lenders offer strong advantages: long-term loans, competitive rates, and non-recourse terms. They do, however, tend to be much more selective. These institutions prefer high-quality properties in major markets and may not offer the highest leverage or be ideal for cash-out refinances.
But if your property is a strong performer and you're looking for long-term stability, this could be a smart avenue to explore.
4. CMBS Loans: Flexible Access with a Few Strings Attached
Commercial Mortgage-Backed Securities (CMBS) offer another option which is attractive for borrowers who may not meet the strict criteria of traditional lenders. CMBS loans are pooled into securities and sold to investors, making them more widely available and sometimes easier to obtain.
They’re generally non-recourse and can come with high leverage, making them attractive for certain strategies. That said, prepayment can be tricky, and servicing requirements after closing are often stricter. It’s a give-and-take, but one that can work well for specific borrower profiles.
5. FHA/HUD Loans: Misunderstood, but Often a Hidden Gem
Many assume that HUD loans are reserved for nonprofits or low-income housing projects. That’s not entirely true. Market-rate properties can also qualify—and the benefits are significant.
With HUD loans, you’ll find non-recourse structures, generous leverage, long terms, and favorable prepayment terms. If you can manage a lengthier approval process and meet their standards, this type of financing can offer unmatched stability and cost savings.
Top-tier firms like Greystone have a deep history in navigating this financing option, so think about whether a HUD loan might be worth exploring.
Don’t Leave Money—or Opportunity—on the Table
While banks are a cornerstone of real estate finance, they’re just one part of a larger picture. Depending on your strategy, property type, and tolerance for risk, other sources may offer more attractive terms or better long-term value.
Understanding all your options helps you make the smartest move for your investment—and ensures you don’t overlook a solution that fits better than you expected.
The information provided in this email, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.