4 Sources for Multifamily Financing

Differentiating the range of financing sources for multi-family mortgage loans.

The range and complexity of financing sources for a multifamily property can be overwhelming. How do you know where to go and what’s the best source for your situation? Needless to say, it can be difficult to navigate the options available and seemingly impossible to know what option is ideal for your situation. Maybe we can help. We’ve have access to multiple capital sources and the experience to point you to the right source of financing for your specific situation. Let’s break down the four common options for permanent financing on multifamily properties so you can be more confident moving into the next steps of your deal.

Conventional Mortgages

A conventional mortgage is often not considered as a source of revenue for your apartment project—and there’s a reason for that. While conventional mortgages are perfect for second homes and investment properties, it can only be used to finance a multifamily with less than five units. Another drawback limits the investor from financing over ten properties, simultaneously.

Conventional mortgages do have their place, though. A conventional mortgage can be a solid option for real estate investors looking to refinance the loans on their small properties (2-4 units) as they usually have better rates and terms than other commercial financing options.


Freddie Mac (FHLMC) and Fannie Mae (FNMA) provide large loans specifically for multifamily unit properties with over four units. FHLMC/FNMA loans do not limit the number of financed properties an investor may own at any one time—just as long as the investor has the rent income to support additional loans. The problem with these loans is qualification. Due to the low interest rates, FHLMC / FNMA qualification requirements are much stricter than many other options. For this reason, these loans are often used to refinance multifamily properties once the requirements are met. In the meantime, developers and investors often secure hard money loans to cover expenses while more stringent qualification requirements are being met (e.g., valuation or occupancy of the building). 

Portfolio Financing

If you have a strong relationship with a local bank or credit union—and need a unique loan or have an unusual project—portfolio financing could be your best option. Suited particularly well for rehabs and new construction, a portfolio loan can help eager developers buy or refinance a multifamily property that doesn’t meet the requirements of conventional multifamily financing or FHLMC/FNMA apartment loans.

Online Peer-to-Peer Financing

Online peer-to-peer (P2P) loans bring together investors looking to finance their next project and investors looking to finance. While P2P lending has been gaining popularity in the last several years, multifamily P2P loans are most often treated as temporary mortgages and come with slightly higher rates than permanent mortgages. P2P real estate loans can be used both for the purchase and refinance of multifamily properties and since they are funded by individual investors, rather than banks or credit unions, the underwriting process is more lenient and flexible—both with approvals and closing times usually cut in half.

Hard Money

As we mentioned above, hard money loans are often used as a stopgap before permanent financing. In fact, the biggest advantage of hard money financing for multifamily properties is speed. The only underwritten component is the ‘as is’ value of the apartment building—this means fast closings. While borrowers may have been directed to hard money in the past due to credit or legal issues—the chief reason we see now is purely speed. Whether a deadline is approaching or financing fell through on a property under contract, hard money loans are often the quickest, most efficient method to secure financing for multifamily properties.   

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