We are still seeing strong options on apartment building loans, in the $400,000 - $5,000,000 range. This segment of the commercial mortgage industry is holding its own and doing a lot better in terms of programs, rates and underwriting flexibility than the typical owner occupied or commercial investment property loans.
Five year, seven year, ten year and even 30 year fixed rate financing is still available. Again as a comparison, 5 year fixed is now, normally the longest you will now see on other investment property loans. Amortization schedule also are aggressive normally at 30 years with a few programs to 35 and even 40 years. Some are fully amortizing. Loan to value restrictions are set at an aggressive 80% on purchases and 75% on refinances vs 60% - 65% loan to value on other investment property loans.
We are seeing more and more borrowers refinancing their existing floating or short term rates into a long fixed rate programs, even if the proposed effective rate is higher than their current program. Many borrowers feel that inflation could be lurking around the corner and they want to secure relatively low rates now, in case they go up substantially in the future, when the economy finally turns around.
Apartment Building Loan
Rates are still good as well, even though margins have with many sources gone up to 50% or more. The underlying indexes have dropped enough to where borrower’s effective rates are still in the high 5% to low 6%’s (as of this writing 2/09).
All in all apartment building loans are still viable. Investors are finding some really interesting deals as well as capitalization rates have gone up pretty much in every market in the country. Even major markets such as LA or New York have seen drops in asking prices. Another component of this is that the general outlook for apartment building loans is strong as the government, via Freddie Mac or Fannie Mae back the apartment secondary market and will likely continue to provide the liquidity that many other markets are lacking.
