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Janover Closes Fannie Mae® Small Loan for California Apartments
The eight-unit property refinanced through the Janover platform with a non-recourse, 10-year, fixed-rate loan.
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Arbor has provided a $1.6 million refinancing package through Janover’s commercial real estate financing platform for the Watsonville Apartments, a multifamily property comprising eight units in Watsonville, Calif.
The non-recourse financing utilized the Fannie Mae Multifamily Small Loan program for a 10-year, fixed-rate loan. The package closed at a 65% loan-to-value ratio with an amortization period of 30 years following a five-year interest-only period. The loan also includes a yield maintenance prepayment provision for a duration of 9.5 years.
"The clients were able to lock in a reasonable rate with Fannie®'s small loan product at a great time, shielding themselves from the current rising interest rate environment," said Janover's Brandon Ramineh, director of capital markets, who facilitated the deal.
The property, located at 130-136 Miles Lane in Santa Cruz County, occupies a prime location less than a mile from the Freedom Boulevard retail corridor. The community is a short distance from the Cabrillo Highway and is less than 50 miles south of San Jose.
Built in 1979 and later renovated in 1990, the garden-style property’s units share a uniform two-bedroom configuration, each with roughly 1,080 square feet of living space, according to LoopNet. The units are configured in a townhouse style, each with its own carport and balcony that extends out over the carport entrance — providing covered parking options for up to two vehicles per unit. Units come equipped with working fireplaces, fully furnished kitchens, and a washer and dryer.
California Multifamily Investment Carries On
Many multifamily markets across California began 2022 with an impressive first quarter that highlighted heavy momentum in rent growth, leasing activity, and overall investment — with greater Los Angeles, Orange County, and the Inland Empire emerging as the hottest regions to watch. That said, after what is being noted as the nation’s best first quarter for multifamily investment on record, many more regions within the state continue boasting strong market fundamentals that have many in the industry excited to see what will happen next.
Most of the state has enjoyed a surge in employment and subsequent decrease in vacancies as many people have returned to the metros which are California’s traditional employment hubs. Given these dynamics, despite California’s reputation as unaffordable, it is safe to assume that the growing demand for rental units will propel further multifamily investment as the year comes to a close.
Related Questions
What are the benefits of Fannie Mae® Small Loans for multifamily properties?
The Fannie Mae Multifamily Small Loan Program offers many benefits for financing small multifamily properties. These benefits include:
- Very competitive interest rates
- Up to 80% LTV allowance
- Streamlined processing/documentation
- Capital improvements may be included in the loan amount
- Most loans are non-recourse
- Supplemental loans are allowed after 12 months
- 30- 180 day rate locks available after commitment (extended rate locks also available)
- No processing fees (except with written approval)
- Non-recourse loans are assumable with lender approval and a 1% fee
For more information, please visit Fannie Mae Multifamily Small Loans and Fannie Mae Multifamily Small Loan Program.
What are the requirements for obtaining a Fannie Mae® Small Loan?
The Fannie Mae® Small Loan program has a few requirements that borrowers should consider. Most importantly, there is zero-tolerance when it comes to borrowers being able to meet the minimum requirements for net worth and liquidity. Being able to meet those stated minimums can make or break the entire deal.
The program has a minimum expenditure requirement for specific expense line items like maintenance, payroll, management, and replacement reserves. Another detail worth noting is that the quality and condition of the subject property are of high importance. A property condition inspection is required for the deal, and any discovered deficiencies must be addressed and fixed before the transaction can close.
There are some lesser-known criteria for subject properties under the small loan program as well. Properties located in seismic zones 3 & 4 with subterranean or “tuck away” parking structures require a PML report. Properties with unreinforced masonry construction, as well as properties built before 1980 that have not had seismic reinforcements or retrofits completed are generally ineligible for financing. Non-Contiguous properties are eligible with a Fannie Mae waiver.
A Fannie Mae waiver is also required for phased properties as well. Properties that belong to an HOA or are a part of a PUD are typically ineligible. Borrowers should be aware that absentee ownership of any property financed through the program requires professional management.
In addition to the facts above, here are a few more things to take into consideration when shopping for a Fannie Mae Multifamily Small Loan:
- Even though the loans are non-recourse, key principals must sign an “exceptions to non-recourse” document, and face some liability
- Borrowing entities and key principals must undergo rigorous lien, litigation, and bankruptcy searches.
- There is a higher insurance expense in this type of transaction due to the higher coverage requirements in the secondary market.
- The Fannie Mae waiver that is required for non-contiguous and phased properties is difficult to obtain.
For more information, please refer to Fannie Mae's Small Loan Fact Sheet or Janover Inc.' Fannie Mae Small Loan term sheet.
What are the advantages of Janover Inc.' financing services for multifamily properties?
Janover Inc. offers a variety of advantages for multifamily property financing. Their experienced team has nearly two decades of expertise in sourcing debt for multifamily and commercial properties across the United States. They are committed to educating and empowering investors by providing them with all of their options. They offer non-recourse, 10-40 year fixed rate debt with LTVs up to 80%. Additionally, they provide a variety of loan options, including banks, life companies, CMBS lenders, Fannie Mae, and Freddie Mac.
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What types of multifamily properties are eligible for Fannie Mae® Small Loans?
The Fannie Mae Multifamily Small Loan Program is designed to finance properties with 5-50 units. Properties located in seismic zones 3 & 4 with subterranean or “tuck away” parking structures require a PML report. Properties with unreinforced masonry construction, as well as properties built before 1980 that have not had seismic reinforcements or retrofits completed are generally ineligible for financing. Non-Contiguous properties are eligible with a Fannie Mae waiver. A Fannie Mae waiver is also required for phased properties as well. Properties that belong to an HOA or are a part of a PUD are typically ineligible.
For more information, please visit Fannie Mae Multifamily Small Loan Program.
How can Janover Inc. help borrowers secure Fannie Mae® Small Loans?
Janover Inc. can help borrowers secure Fannie Mae® Small Loans by providing capital markets advisory services. Janover Inc. has nearly two decades of expertise sourcing debt for multifamily and commercial properties across the United States. Fannie Mae® Small Loans are typically non-recourse, 10-40 year fixed rate debt with LTVs up to 80%. Janover Inc. can help borrowers understand their options and provide guidance on the best loan product for their needs.
What are the advantages of Fannie Mae® Small Loans for multifamily properties?
The Fannie Mae® Small Loans for multifamily properties offer a number of advantages, including:
- Very competitive interest rates
- Up to 80% LTV allowance
- Streamlined processing/documentation
- Capital improvements may be included in the loan amount
- Most loans are non-recourse
- Supplemental loans are allowed after 12 months
- 30- 180 day rate locks available after commitment (extended rate locks also available)
- No processing fees (except with written approval)
- Non-recourse loans are assumable with lender approval and a 1% fee
For more information, please visit Fannie Mae Multifamily Small Loans and Fannie Mae Multifamily Small Loan Program.