April 3, 2014
What is a commercial apartment loan? It is commercial financing for a multifamily complex of five units or more – usually on a commercially zoned lot. A duplex, triplex, or fourplex would not qualify for a commercial apartment loan, because those are considered residential properties, and are usually zoned residential. However, if the residential units are in contiguous buildings of five units or more, or if there are five units or more on one tax lot, they can qualify for a commercial apartment loan.
One to four unit rental properties will be able to be financed with better quality conforming (meets Fannie Mae and Freddie Mac standards) residential loans, which have a lower rate than commercial apartment loans and are known for offering a 30-year fixed rate and a 30-year term and amortization. Most commercial apartment loans have a 5- to 10-year fixed rate, and on average these loans have 10-year maturities (the mortgage is due and payable in 10 years). Often these loans have less than a 30-year amortization.
Residential investment property loans require appraisals that use the sales comparable and cost approaches. A commercial apartment loan requires a commercial appraisal that also adds an income approach. The income approach is the most important determinant of value for a commercial apartment loan appraisal. It will compare the net operating income from the subject property and three to five other properties to determine value.
At Apartment Loan Store, we have been funding commercial apartment loans since 1997. We get our funds from Fannie Mae, Freddie Mac, FHA, Wall Street Commercial Backed Security Funds (CMBS), private capital funds, and isurance companies. To find out more about our loan products and rates, call one of our friendly loan specialists at 866-811-9515.
By Terry Painter, President