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Commercial Real Estate FAQ With Brian Burke On MultiFamily Apartment Building Investments

What Is Common For The Type Of Financing That Is Put On Apartment Type Assets?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

When it comes to apartment type asset financing, the biggest lenders in this space are typically the agencies, referring to Freddie Mac and Fanny Mae. They make up a large percentage of this multi-family financing and have a variety of products to suit various needs. Aside from those agencies, one also has life insurance companies, CMBS, banks, and bridge lenders. 

Richard Wilson: What is common for the type of financing that’s put on apartment building assets? 

Brian Burke: The biggest lenders in the multi-family space is what we call the “agencies”. The agencies are what you’re already familiar with with single family ownership, and that’s Freddie Mac and Fanny Mae. They comprise a very large percentage of multi-family financing, they have a variety of products, they have a fixed rate product that can go for 5, 7, 10, or 12 years, they also have floating rate products for 5 and 7 and 10 years. So they really are the go-to financing source, it’s who we use in almost all of our transactions, but there are others. Life insurance companies have an interest in larger, especially larger newer assets. CMBS, which stands for commercial mortgage backed securities, CMBS lenders play a role in financing, although right now a little bit to a lesser degree. Then you also have banks, just regular banks, community banks, commercial banks, and a variety of bridge financing players who are debt funds that specialize in providing shorter term financing with the intention of kind of getting you over a hump. In other words, from where the property is to where it’s going, maybe it doesn’t qualify for banker agency financing, the bridge lenders can fill the gap. 

Richard: Right, okay. 

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Richard Wilson