Build to Rent Housing construction loans for developments are helping address the shortfall in housing supply nationwide. In the past five years we have seen the growth in Build To Rent (“BTR”) developments grow exponentially. With this increase in popularity, new construction loan products have emerged with a focus on financing the construction for BTR Developments. The loan products Caffrey & Company LLC works with offer new construction loans coupled with a term take out loan. The minimum loan size is $2 million and can go well in excess of $50+ million. Leverage to 80% to 90% of costs is available.
The Build to Rent Developer can choose between floating rates and fixed rates. Construction loan term is most commonly two years with extension options available. The home types can include multifamily, townhomes, duplexes, fourplexes, detached single family rentals (“SFR”) or a mixture of these property types.
How long will it take to close a Build to Rent construction loan? Normally, 45 to 50-days to close once all of the documents have been submitted. It is important to have all entitlements and permits in place for a speedy loan closing. Options are available for non-recourse loans depending on the developers needs. Once the home is occupied a 75% loan to value can be placed on the property to takeout the build to rent construction loan.
The Midwest reports the highest levels of all rental units that are single family rental homes. Specifically these cities are have some of the highest percentage of SFR units, Kansas City, Pittsburgh and St. Louis. From a gross number of new build to rent developments the top four cities are Tampa leads the way, followed by Indianapolis, Columbus and San Antonio. The construction of new build to rent homes hit a record in 2022, with more than 14,500 homes according to RentCafe.
With higher interest rates and increase mobility of Millennials rentals of single family homes are becoming more and more popular. Higher construction and financing costs are being offset by rising rents with year-over-year rent increases, that in many areas of the country, are quite substantial.
Specialty Build to Rent construction loans have entered the market place offering nationwide financing for experienced developers. Many banks have pulled back on new development construction either limited funds to existing bank customers or demanding higher cash equity.
How will the construction loan be taken out? Both Freddie Mac and Fannie Mae are actively financing stabilize build to rent developments nationwide. We can also bring portfolio lenders such as insurance companies to compete for the best permanent loan product.
What is needed to move forward for a free loan proposal?
- Detailed construction budget for the build to rent construction loan.
- Critical path showing anticipated draw schedule over time.
- market study if available.
- copy of loan purchase contract if applicable.
- resume on investors/developers
- copies of building permits
- Copy of design plans, site plan, engineering
- personal financial statement and real estate owned schedule for each principal ( sample forms available upon request).
- Plans with the property once completed, e.g. hold or flip?
Need permanent financing for existing multifamily of mobile home park? Please see our rates.
Contact Mike Caffrey President, Caffrey & Company LLC
On our web site you can read about specific loan products: www.caffreyloans.com/loan-products, offered by Freddie Mac, Fannie Mae, HUD/FHA, Commercial Mortgage Back Securities (CMBS) and other loan products. Want more details on sample interest rates for apartment check out Interest Rates for Apartment Loans also on our web site: www.caffreyloans.com/apartment-loans.