How to Finance Large Multifamily

How to Finance Large Multifamily

I am deciding to change things up a bit on this blog. Long gone are the days when I cared about SEO rankings and wrote humongous five thousand word posts. Don’t care anymore. My life is different now and moves much quicker than it used to. But, I still want to teach!

How Will I Do It

I’ve decided to write more but much shorter posts. As things unfold on a daily basis, I’ll take a few minutes to put some thoughts down that I think might be useful to you.

The articles might be less polished and pretty, but this way I can deliver to you more value consistently. Let me know in the comments below if you are digging this new approach.

Financing of large multifamily is on tap for today.

How to Finance Large Multifamily

The two main categories of financing options are:

  • Recourse
  • Non-recourse

Recourse loans are usually offered by portfolio lenders. These lenders are typically local banks with a few locations in your town. They keep these loans on their books instead of selling or packaging them as MBS.

I think it’s probably fair to say that these loans might go up to a few million dollars, but not much more. Portfolio lenders are not very large organizations, and they don’t typically want to put too many eggs in one basket.

These loans come with personal guarantees.

Non-recourse loans come in many shapes and sizes. These are typically categorized into either GSE or Bridge paper.

GSE Loans

GSE stands for Government Sponsored Enterprise, and you likely know the two largest players Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are the largest buyers of apartment MBS in the secondary market.

Fannie and Freddie both have programs for smaller loans (under $7.5M) and larger loans. Many varieties of paper are available, but the most appealing feature is that both Fannie and Freddie do offer loans that are fixed interest for up to 10 years, and amortized over 30 years

Of course, there is also FHA, but that’s a separate animal.

There Are Caveats with GSE

The main drawback of these is that the underwriting criteria basically excludes anything but stabilized assets. If you are buying something to re-position, that has a higher vacancy or lower rents, GSE financing simply doesn’t work. Such is the case with the Silver Tree that we closed on last week.

So, what now…

Bridge Financing

In case the re-positioning project doesn’t fit the GSE mold, we have to go another route. There are plenty of companies out there who understand what we do, understand that it’ll take time for is to do the work of stabilizing the property, and in the meantime, the numbers just don’t fit into the GSE underwriting model.

These companies naturally assume the higher risk and expect a higher reward. These loans are floaters, meaning the interest rate is not fixed but is usually tied to LIBOR. This means that purchasing of caps is advised.

These lenders, since they know the current numbers suck, actually evaluate your business plan more than the current condition of the property to determine whether they agree that the property can be re-positioned the way that you propose. This is where underwriting like a pro is really helpful because before you ever try for a loan like this you need to know what the lender is evaluating and how.

After the asset is stabilized it can then be refinanced into GSE paper.


This is a very rudimentary look at large-scale multifamily financing. Feel free to come at me with questions in the comment section below, or feel free to reach out via email.

Talk soon,




  • Peggy Reply

    Good tidbits on multi-family loans. I like that this is short yet informative. Thanks!

    • Ben Reply

      Thanks, Peggy!

  • Angel Mendoza Reply

    Very informative! I will be looking forward to these!

    • Ben Reply

      Thanks, Angel!

  • Tom Reply

    Where can you find lenders that do Bridge Financing? Is that the term they will advertise the loan by?

    • Ben Reply

      Tom, yes this is the name of this type of a loan. They are called bridge loans.

      We had a number of lenders and brokers competing for Silver Tree. We ended up going with Phoneix office of Berkadia, who floated to several lenders which were all close but with some variance in terms. We ended up choosing a lender from Manhattan.

      Believe it or not, but one of the difficulties was that our deal was on the small side. The bridge lenders like to be over $10M – we were at just over $7M on the debt.

      • Tom Reply

        Thank you.

        Do you have any more information or links on the GSE for large multifamily? Before I thought they originally didn’t lend above 4 units.

        • Ben Reply

          Tom, Fannie and Freddie both do a lot of commercial paper for apartments. There are lots of options here, and the best thing to do is just to find a good broker. I will say, however, the fees are substantial. I am not sure that I’d go to them for a small $1.5M loan.

          • Mike

            Great intro tip. Any suggestions on finding a broker for GSE loans?

          • Ben

            Don’t have to look for them. They are everywhere 🙂

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