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Choosing the right multifamily loan option can be daunting. The tidal wave of information available to us every time we touch our phones is intimidating, to say the least. Even the savviest real estate investors are cognizant of the fact that they don’t know all their options. The biggest shops in the world hire financial intermediaries to advise on and arrange financing for themselves — why shouldn’t you? Start by seeking more information on the most basic multifamily loan options, along with some pros, cons and requirements.


Agency debt speaks of Fannie Mae and Freddie Mac, each with dozens of particular loan programs and always competing against each other. There are the Fannie Small Loans, which are special because they offer fully amortizing loans (fixed and fully amortizing up to 30 years). For loans with a little more hair on them, Fannie Mae Delegated Underwriting and Servicing (DUS) may be the way to go. DUS ultimately puts some of the decision making back in the hands of the lender, versus the standard procedure of kicking loans back to the General Services Administration (GSA) for approval.

Larger, straightforward loans are a good fit for Freddie Mac conventional. Freddie also has a very popular small balance loan (SBL) program that is great in the largest U.S. markets. Once you get into smaller markets, though, spreads widen and leverage drops. For loans from $1 to $7 million in large markets, a Freddie SBL is the way to go.

Agency loans are generally going to look for the key principals (KPs) to have good credit, a cumulative net worth greater than the loan amount and liquidity greater than 10% of the loan amount (outside of retirement accounts) post-closing (but not from the proceeds of a closing). With a good broker, you can get agency loans as small as $1 million or even a little less.


CMBS loans are a great option for KPs who don’t fit the net worth and liquidity requirements of agency debt or fall outside of their sometimes-rigid box in another capacity. CMBS lenders securitize and sell loans post-closing. They focus almost solely on the quality of the underlying asset. This means they may at times be more stringent on lock box requirements, for example, but will be easier on KP requirements or…