Multifamily & Apartment Building Loans

An apartment complex loan is a commercial mortgage secured by the building. The lender sizes it from the property’s rent roll and net operating income: the loan is the lower of a loan-to-value cap and the amount the NOI can repay at a minimum DSCR (often 1.20–1.25x for bank and agency loans). Bank loans usually have a 5–10 yr term with 20–30 yr amortization and a balloon at maturity; agency and HUD-insured loans can run longer. Buildings with five or more units are financed this way — one to four units use residential mortgages.

Six main groups: local and regional banks and credit unions; Fannie Mae DUS lenders and Freddie Mac Optigo lenders (agency loans, five or more units); FHA-insured lenders under HUD Section 223(f) for buying or refinancing existing apartment properties; life insurance companies for low-leverage loans on stabilized buildings; CMBS lenders for larger loans; and DSCR and bridge lenders for smaller or value-add buildings. BestLoanUSA is not a lender — we compare offers from 30+ lenders across these groups, with no hard credit pull to start.

The LTV cap sets the minimum — 25–35% for a typical bank loan and 20–25% for a DSCR loan — but the property’s income often requires more. In the example above, a $3,000,000 building with $180,000 NOI qualifies for $1,898,000 at a 6.5% example rate and 1.25x DSCR, so the buyer needs about 37% down, not 25%. Higher NOI or a lower rate closes that gap.

Expect a current rent roll, the trailing 12-month (T-12) operating statement, the purchase contract or current loan payoff statement, a schedule of real estate you own, a personal financial statement, and entity documents. Bank loans also ask for recent personal (and, where applicable, business) tax returns; DSCR loans qualify on the property’s income and skip personal income documents. The lender orders the appraisal and third-party reports. The BestLoanUSA loan checklist builds the list for your deal.

Properties with 5 or more residential units are classified as commercial multifamily and require commercial financing. 1–4 unit properties are residential and can use conventional residential mortgages (Fannie Mae residential, FHA). The financing options, rates, and underwriting process are fundamentally different above and below the 5-unit threshold.

Agency lending refers to loans originated through Fannie Mae and Freddie Mac multifamily programs. Typical terms: 6.25–7.25%, 5–30 year terms with up to 30-year amortization, up to 80% LTV, and non-recourse execution — you’re not personally liable except for standard carve-outs such as fraud and bankruptcy. The programs finance residential rental property, not office, retail, or industrial.

Yes. DSCR loans qualify you based on the property’s rent roll, not your personal income. If the building’s NOI covers at least 1.0–1.25x of the annual debt service, you qualify without providing tax returns, W-2s, or pay stubs. It is a common path for investors building a portfolio of small apartment buildings.

Value-add means acquiring a property below market value, renovating units (new kitchens, bathrooms, flooring, appliances), raising rents to market rates, and refinancing at the higher appraised value. Bridge loans fund the acquisition and renovation. Once stabilized (85–90%+ occupancy) with market rents, you can refinance into permanent or agency financing, typically at a lower rate than the bridge loan.

Lenders examine current rents vs market comparables, lease expiration dates, tenant payment history, vacancy trends, and unit mix. They calculate effective gross income (total rent minus vacancy and concessions), subtract operating expenses, and arrive at NOI. The rent roll is the foundation of multifamily underwriting — a clean, well-documented rent roll helps underwriting move faster.

Yes. Many investors use a 1031 exchange to move into multifamily. Sell a smaller investment property, defer capital gains taxes, and reinvest into a larger apartment building. The exchange must follow IRS rules: identify replacement property within 45 days and close within 180 days. Many investors 1031 from single-family rentals or small multifamily into larger apartments.