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What is Multifamily Lending?

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  • Written By: Tess C. Taylor
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 September 2016
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Multifamily lending refers to financial institutions or mortgage companies lending money to investors of a multifamily property, such as an apartment building or dwelling in which several families may live. Multifamily lending many also be presented as traditional forms of mortgages offered to buyers who are considering purchasing a unit within an apartment building, complex or community. In many cases, the multifamily loans may be offered at a better rate as a result of many consumers purchasing a property in the same vicinity or because of the value of the property itself.

In terms of loan amount, multifamily lending can typically exceed millions and so buyers must be sure that the investment is worth the overall risk. An evaluation of the property itself can be made to assess the actual market value and identify any potential pitfalls of taking on such a high risk type of loan. In many cases, the property may be either new or refurbished to greatly increase its value on the real estate market and make it as attractive as possible to potential buyers.

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Multifamily lending has its advantages to the smart investor as well. Someone looking for a deal in real estate can almost guarantee that a solid apartment building can keep its value even as the market changes and be able to repay the multifamily loans within a relatively short period of time by either leasing out the units or reselling the multifamily loans. It’s easier to get a return on the investment in an affordable apartment than it is to realize a quick profit on a house, even in a poor economy.

Multifamily lending is a good option for private residential investors looking for a way to build equity and invest in a future for a family. A multifamily unit can be purchased for not much more than a single family home and one or more units can be rented for income while another can be lived in. The payments received can be used as capital to repay any multifamily loans or as additional income for the upkeep of the property itself.

In some cases, multifamily lending groups are able to obtain financing to purchase and rehabilitate existing properties which are then either lived in, rented out, or sold for profit. The loans can quickly be repaid as a result of a group of investors willing to work together to improve a community and create new homes for others. Multifamily apartment listings can be found in many newspapers or online advertisements.

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