Tips on Refinancing Small Apartment Buildings

Sponsored by Freddie Mac Multifamily

Small apartment building owners employ a variety of investment strategies with their properties, and sometimes this requires refinancing every several years.

Owners may purchase properties with plans to renovate and then pull out some of the equity they’ve created. Others prefer shorter-term financing because they aren’t sure how the economy will look many years down the road, and they’d like to maximize their profits. And still others may be dipping their toes into multifamily investing and learning as they go. There are many reasons to take out a 5-, 7-, or 10-year loan, just beware that short-term financing means you’ll need to refinance more often.

Whether your timing is driven by a maturity deadline or a completion of renovations, you should start getting your ducks in order about three months before you plan to refinance your multifamily property.

1. Present a clear picture of your property and tenants

Lenders will be doing their own due diligence on you and your property once you get the ball rolling, but you can help the process go smoothly by being prepared. The first two items a lender will request are current and complete operating statements and rent rolls. They want to make sure the building is running efficiently, the history of what your units are renting for, and your average occupancy. Being able to provide legible, orderly copies of these items will start you off on the right foot with your lender.

2. Show how your investments have improved the property value

If you’ve completed any improvements to your property in the last several years, you’ll want to show proof of those upgrades to your lender. Whether you’ve landscaped, added green enhancements, renovated kitchens, or added amenities, you may have increased the value of the property. It’s important to note these changes on a schedule of improvements – they may be advantageous for your refinance terms.

3. Clear up any credit or servicing issues

Now is a great time to check on your personal credit to make sure there’s nothing you need to address – including any concerns that may have arisen with your servicing team since your loan was originally put in place. You’ll want to make sure you’re in good shape to close on your new loan without being slowed down by old issues.

4. Have a general idea of the type of loan you’re looking for

Borrowers have a variety of strategies at their fingertips to secure financing based on their wants and needs, and Freddie Mac offers many flexible financing options. If proceeds are your priority, we finance up to 80% loan-to-value in certain markets. If you’re focused on maximizing your returns, we offer partial- and full-term interest-only alternatives. If flexibility is a concern, we offer different prepayment options. To find an approved lender or details on our financing options, visit freddiemac.com/small-loans.