Rehab Loan Options for Multifamily Property Investors

Distressed properties, needing heavy rehabilitation or upgrading, are still a hot target for multi-family investors and home flippers, with about 39 percent of flipped homes purchased either in the foreclosure process. It’s easy to see why investors focus on these established areas – mainly because of their strong rental market potential – especially those who are motivated to secure the best rehab loan option offering a low interest rate and a speedy application, draw and overall rehab process in order to keep profitability high. There can be so many variables with rehabilitation projects like a multi-family renovation can offer its fair share of complications so it’s crucial to connect with a private lender who has experience and knowledge to take a proactive stance on any project delays like labor issues, inclement weather, or supply chain problems.

Private lenders like our Broadmark Realty Capital team specialize in rehab construction loans for multi-family, commercial, and even industrial buildings. Tailoring loan solutions to each individual project and the borrower’s needs is what they do daily. Take the time to unpack the pros of working with a private lender for rehabilitation loans for your next multi-family investment property. But first, let’s review some rehab loan and multi-family basics.

What is a Rehabilitation Loan?

The term rehabilitation loan, or rehab loan, is used to describe certain loans offered to cover the additional costs of repairs and renovations. Rehab loans support renovations and upgrades needed to quickly “fix and flip” including a multifamily investment property. These types of loans are typically approved quickly, a great resource for multifamily investors looking for their sensitive timelines.

The best type of rehab loan is one that offers easy, efficient and a practically stressless experience for both the lender and borrower. Securing funding sets a timely first step for your project kickoff and duration, and who better to do that than a seasoned lender who specializes in rehab and construction loans?

Can a Rehab Loan be Used for an Investment Property?

Yes, rehab loans can be used for investment properties, but under certain circumstances. Unlike a conventional lender, our firm does not have strict liquidity requirements, which means you can access your funding faster and with more flexibility. Below we explore a few of the loan options available for multifamily rehab project funding.

What is a Multifamily Investment Property?

A multifamily dwelling is any residential property that contains more than one housing unit, such as a duplex, townhome, or apartment complex. Multifamily dwellings that contain more than four units are considered commercial properties.

Why are Some Multifamily Properties Considered Commercial?

It’s important to note that any multifamily property consisting of four or more units is considered commercial real estate. Commercial real estate is a designation for any income-generating property over a certain size, despite the property’s use as a residential dwelling. With this distinction comes many financing implications that investors should be aware of and consider prior to putting in an offer.

Multifamily commercial properties tend to be more expensive and more challenging to finance. Lenders view commercial loans as riskier than traditional residential loans, and therefore investors should anticipate higher interest rates and shorter terms for commercial loans. Residential mortgages are typically approved quickly. With a 30-year fixed rate, it may be more challenging to obtain a commercial loan. The lender may offer a high-interest rate with as little as a 5-year repayment term.

How a Private Lender Can Support your Multifamily Investment Project

Looking for a rehab loan option as an investor? Consciously choose to work with a private lender from kickoff to completion. Unlike conventional lenders, a private capital group bases the loans on the completed value of the improved building, versus the current condition, which reserves more funding for the project as a whole. Rehab loans of this caliber cover more major upgrades such as tenant improvements, expansions, and redevelopment and can contribute to a bigger profit when it’s time to resell. Because private lenders have lower equity requirements, investors can expect an easy application process and quick cash draw for a pending multifamily investment property. Let’s recap with a list of pros with working with a private lender like us.

Pros of Obtaining a Rehab Loan through a Private Lender:

More Funding

Secure more funding based on the completed value of the property.

Quick Draws

Close and access cash in as little as 5 days.

In-House Underwriting

Fast and flexible evaluation process with same day response time and term sheet within 48 hours.

Market Mindfulness

Seasoned and insightful construction market experience that provides incomparable lending power to your real estate and investment needs.

As specialists in rehab as well as construction loans, we diligently tailor our loan solutions to your needs. Get a complete picture on your loan options by contacting the Broadmark Realty Capital team.