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Multifamily loan rates and Commercial loans

Student Housing Loans

June 24, 2014

Student housing loans are a specialty that not all commercial lenders prefer. Although they are a type of multifamily housing loan they differ from typical loans on apartment complexes. Student housing loans are not as favored by lenders for the following reasons:

  1. They are most often rented by the bed. Although they are in apartment buildings that are comprised of mostly 2 to 4 bedroom units, the leases are usually to individual students. Lenders prefer it when one strong tenant with good credit signs the lease.
  2. Students are more likely to have financial difficulties and pay the rent late, or not pay at all. The way to get around this is to have the parents guarantee the leases.
  3. Student housing often has seasonal occupancy. Often students sign 9 month leases and leave for the summer. Annual occupancy might average 80% instead of 90% or more because of the seasonal nature of student housing. This can be mitigated by insisting on 12 month leases.
  4. On average students occupy from July through September for the school year. Lenders prefer continual occupancy throughout the year. 

On the positive side student housing properties get a much higher than average rent per square foot. At Apartment Loan Store, we have specialized in student housing loans with very low rates since 1997. Our top programs for student housing are:

  • Fannie Mae’s Dedicated Student Housing Program – For student housing properties located close to universities or colleges comprised of 10,000 students and the complex is occupied by 80% students or more. These loans are usually non-recourse with a  maximum fixed rate loan term of 10 years, amortizations average 25 – 30 years, and the maximum LTV is 75%. A 10% mezzanine loan can sometimes be added for a total of 85% financing. Partial term interest only is available.
  • Freddie Mac Student Housing Program – For student housing properties located near universities or colleges comprised of 8,000 students or more. These loans are usually non-recourse with a maximum fixed rate loan term of 10 years, amortizations of 30 years are typical, and maximum LTV is 75% tp 80%. Interest only is available.   
  • Commercial Mortgage Backed Security Program (CMBS) – these loans are usually non-recourse and can go up to 75% LTV with 25 or 30 year amortizations and up to a 10 year fixed rate term.  Partial term interest only is available.
  • Regional Bank Program – Typically recourse and up to a 10 year fixed rate term with a 75% LTV and a 30 year amortization.

For more information about our student housing loan programs and to get prequalified,  please call one of our friendly loan specialists at: 866-811-9515.

By Terry Painter/President   Apartment Loan Store, and Business Loan Store

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