Eligible Properties: 

Eligible Borrowers:  Must typically be a Single Purpose Entity (SPE), though some lenders allow general or limited partnerships, limited liability companies, corporations, trusts, or individuals. 

Timing:  Loans typically close 45 to 60 days after initial application 

Requirements for Student Housing Properties

• 40% or more units must be leased to undergraduate or graduate students
• Must have at least 80% of the units leased to graduate or undergraduate students
• Need to be located near a college/university campus with at least 10,000 students enrolled, and at least 50% of those students enrolled full-time
• Have at least 80% of leases with 12-month terms (guaranteed by parents), or leased by student tenants with the financial capability to pay their lease
• Needs to be within 2 miles of campus or a college/university transportation line
• Must be operated for one school year and be in its second year of operations
• Can be located on university-owned land (provided key principal has at least five years of experience and "operates at least one other Dedicated Student Housing Property" on college or university owned land)

Fannie Mae Student Housing Loans: Pros and Cons

Advantages

• Very competitive interest rates

• Up to 75% LTV

• Most loans are non-recourse

• Interest-only loans are permitted in some situations

• Supplemental loans allowed after 12 months

• Loan underwriting may be based on a per bedroom rate, leading to a higher loan amount than for a comparable (non-student housing) multifamily property

• 30-90 day rate locks available after commitment, with 6 month extended rate locks also available before closing (1 year-rate locks available in some cases)

• Loans are fully assumable (with lender approval)

Disadvantages

• Requires third-party reports, including an Appraisal, Phase I Environmental Assessment, and Physical Needs Assessment. May also include reports such as Flood Inspections, Property Surveys and Site Inspections.

• Typical lender closing costs are about $12,500 (including third-party reports)

• Also typically requires about $7,500- $12,500 in legal costs

• Replacement reserves of $250/unit per year are required

• Student Housing Properties require at least 40% student occupancy (may be up to 80% undergraduate-only occupancy for some lenders), and often also require a minimum overall tenant occupancy of 90%

• Owner/operators must be U.S. citizens, with liquid assets that can cover at least 6 months of mortgage payments after closing

• Owner/operators must have a proven track record in the student housing industry

• Student tenants must typically sign 12-month leases guaranteed by parents, or must be currently employed and have good credit

• Typically requires a 2% rate lock deposit paid at rate lock (refunded after Fannie Mae purchases the loan, usually about 30 days post-closing)

Case Study: Buying Student Housing in Austin

Meet Sarah, a real estate investor interested in providing housing for undergraduate and graduate students in Austin, Texas. She found a five-year-old student housing property consisting of two buildings with a total of 30 units, located within 2 miles of a university with more than 15,000 enrolled students.

However, Sarah faced a challenge in finding a financing solution that specifically catered to student housing properties. Traditional financing options didn't address the unique requirements of student housing, such as the necessity for leases guaranteed by parents or the 12-month lease terms.

That's when she discovered the Fannie Mae Student Housing Loan, an ideal solution for her investment goals. With competitive interest rates and a non-recourse feature, this loan product was designed to address the unique needs of student housing properties.

The property's purchase price was $4.8 million, and Sarah managed to secure a Fannie Mae Student Housing Loan at 70% LTV, which amounted to a loan of $3.4 million. With a 10-year term and a fixed interest rate, Sarah was able to benefit from stability and predictability in her payments.

Thanks to the Fannie Mae Student Housing Loan, Sarah successfully invested in the multifamily property, ensuring a comfortable and secure living environment for students pursuing higher education in Austin. This financing solution allowed her to contribute to the local community and support the educational aspirations of the next generation of American leaders, workers, and innovators.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Sample Fannie Mae Terms for Student Housing Loans in 2024
2. Requirements for Student Housing Properties
3. Fannie Mae Student Housing Loans: Pros and Cons
4. Advantages
5. Disadvantages
6. Case Study: Buying Student Housing in Austin
7. Get Financing