What are the Top Misconceptions for Multifamily Lending?

There’s no doubt that multi-family investments have the potential to deliver solid returns to investors. There are several benefits of multi-family properties that make it a beneficial investment option, whether it’s due to increased appreciation or consistent rental income. Yet, there are still some common misconceptions about multi-family properties and multi-family lending.

Continue reading to learn about the top misconceptions for multifamily lending below.

It’s Expensive and a High-Risk Investment

Multi-family property costs demand a large sum of capital compared to single-family units; yet, they have the potential to provide better financial returns in the long-term. Since there are multiple tenants the commercial landlord can expect a stable rental income, which increases profitability and helps to ensure consistent cash flow. Even if one unit is vacant, the landlord won’t lose all of the rental income and can easily generate rent form other units, which is one reason why it’s considered a low-risk investment. While investing in a multi-family property require larger funding, the potential of returns makes it a valuable investment.

Securing Financing is Very Challenging

While it may seem that securing financing is an insurmountable task, it can actually be easier to finance multi-family commercial units than other residential and commercial properties. Consider this: it’s a low-risk investment with a potential to generate solid, consistent rental income, which helps investors earn the vote of confidence from lenders.

Multi-family properties still hold their value, which tends to increase over time, even when they don’t provide immediate cash inflow. Most lenders are more than happy to provide financing to investors who are looking to invest in multi-family commercial units.

Good Deals are Hard to Find

Since fewer people have exposure to the commercial real estate market compared with the residential market, many borrowers find the commercial market more confusing and assume that good deals are hard to find. Compare today’s market to that of ten years ago, however, and the differences are extraordinary. With technology and the advent of proven private lenders, it’s easier than ever to find great deals on commercial real estate. And often commercial real estate offers better returns with lower risks than investments in residential real estate.

You Should Only Consider Big Bank Loans

Big banks have their place, but it’s no surprise that many people in both the residential and commercial markets are increasingly shying away from dealing with them. Today’s borrowers want flexibility in their lending, as opposed to high interest rates and a myriad of forms and restrictions.

This is just one of many reasons that smart borrowers are more and more turning to private commercial real estate lenders, as the benefits they offer are far and beyond what’s possible when working with a large bank.

The Loan Process is Lengthy and Too Complex

While, of course, the commercial loan transaction process does take a bit longer than residential loans, it doesn’t have to be as complicated and tedious as you may have heard. Typically, lengthy commercial loan transactions are a result of poor communication or unforeseen challenges regarding the borrower’s finances, credit or property.

Reputable and experienced lenders work hard to identify those types of issues early on so that delays do not occur in the underwriting stage of the process. Beyond that, strong lenders also make communication a priority so that borrowers do not experience any surprises throughout the transaction. If these steps are taken, commercial loan transactions can be completed in about 30-45 days.

If you are trying to secure a commercial loan while separating myth from fact, feel free to reach out to our experts here. They will be happy to guide you in the next steps towards accomplishing your investment goals.

Final Thoughts

Rental property demand is fairly high in the country. Property owners can expect a high occupancy rate on multi-family properties, especially those situated in a strategic location. Beyond that, investing in multi-family properties allows you to acquire property for less, on a per-unit basis, than building a portfolio of single-unit homes. If you’re seeking a loan to fund multi-family commercial units, contact RCN Capital today! At RCN Capital, we provide a wide range of financing solutions at competitive rates.