2025 Guide to Financing Multifamily Properties

Securing funding for an apartment block—defined as a multifamily property with five or more units—requires a different approach than traditional residential home loans. In 2025, various commercial real estate lending options and strategies have emerged to help investors navigate this complex financing landscape.

Popular Financing Options

Agency Loans (Fannie Mae, Freddie Mac): These loans are best suited for borrowers with solid credit and offer non-recourse financing, competitive rates between 4-6%, and high loan-to-value ratios.
HUD/FHA Loans (e.g., HUD 223(f)): Especially ideal for larger projects (starting at approximately $4M), these loans come with attractive interest rates around 3.5-5% and extended terms up to 35 years.
Bank Balance Sheet Loans: For those who might not meet agency criteria, these loans provide flexible terms and quicker disbursement, although they often require recourse.
Commercial Real Estate (CRE) Loans: Specifically tailored for multifamily investments, these typically offer terms of up to 20 years with competitive rates.
Bridge Loans: These are short-term financing solutions, usually spanning 6 to 36 months, ideal for property stabilization or renovation projects.
Hard Money/Private Money Loans: Suitable for borrowers with credit challenges, these loans can be approved quickly; however, they generally carry higher costs.
Seller Financing: This option allows buyers and sellers to negotiate terms directly, providing an alternative when conventional financing isn’t available.
Crowdfunding and Joint Ventures: Pooling resources with other investors can reduce entry barriers and spread out risk, making these arrangements increasingly popular.

Key Considerations for Borrowers

When planning your financing strategy, keep the following factors in mind:

Down payments generally range from 20-30%.
Credit score requirements vary depending on the type of loan.
A debt service coverage ratio (DSCR) between 1.2 and 1.35 is typical.
The property’s income (net operating income or NOI) plays a crucial role.
Be sure to understand whether your loan is recourse or non-recourse.

Steps to Secure the Right Financing

Clarify your investment objectives.
Review your financial situation and capabilities.
Conduct in-depth research and analysis on potential properties.
Perform thorough due diligence on each opportunity.
Select the financing option that best aligns with your needs.
Submit your loan application.
Negotiate the purchase terms effectively.
Complete the closing process.

Strategies for a Successful Investment

Consider partnering with a multifamily loan broker to streamline the process.
Work with local lenders, who may offer more flexibility.
Focus on stabilizing your property before transitioning to long-term financing.
Investigate the local rental market to ensure consistent demand.
Look into potential tax incentives, such as the Low-Income Housing Tax Credit (LIHTC).

Overcoming Common Challenges

Investors may encounter several obstacles, including high capital requirements, tenant turnover, stringent lending criteria, and market volatility. By being prepared and researching thoroughly, you can better manage these risks.

UK investors, for instance, have options like Multi-Unit Freehold Block (MUFB) mortgages. Additionally, construction loans covering up to 75% of the project’s cost can be suitable for new developments. Always compare offers from multiple lenders to get the best deal.

For more details and advice tailored to your situation, visit multifamily.loans or apartment.loans.