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Freddie Mac Student Housing Value-Add Loan
Freddie Mac Loans for the Light Renovation of Student Housing Properties
Freddie Mac Student Housing Value-Add Financing
In college towns and major cities across the U.S., the student housing market is alive and well — but to stay competitive, investors need to make sure their properties are modern, livable, and comfortable. Sometimes, that requires a little bit of work.
So, if you're interested in purchasing or refinancing a student housing property in order to make some light repairs or renovations, the Freddie Mac Student Housing Value-Add Loan could be the perfect choice. Student Housing Value-Add Loans offer LTV allowances of up to 85%, are interest-only, and are non-recourse, making them an incredibly attractive option for developers looking to make their student housing properties more profitable.
To learn more, check out Freddie Mac’s official Student Housing Value-Add Loan Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Student Housing V Loan program.
Sample Freddie Mac Terms for Student Housing Value-Add Loans in 2024
Size: Varies based on LTV and DSCR requirements
Use: Acquisitions and refinances of eligible Student Housing properties requiring moderate upgrades of $10,000 to $25,000 per unit
Terms: 3 years with one 12-month extension (borrower's request), and another optional 12-month extension (based on Freddie Mac discretion)
Interest Rates: Floating-rate interest-only loan
Interest-Rate Caps: Not required
Maximum LTV: Up to 85%
Minimum DSCR: 1.20x
Recourse: Non-recourse with standard “bad boy” carve-outs
Eligible Borrowers: Must have experience owning and operating similar Student Housing developments. Guarantors must have 1.5x the standard liquidity/net worth requirements.
Eligible Properties:
Properties must have no more than 250 units or 625 beds
Eligible properties are high-quality and only require light renovation
REO (real-estate owned) properties in receivership or properties performing below market averages (especially those requiring improved management) are also eligible
School must have at least 15,000 minimum enrollment
Properties must be located within 2 miles of campus, with easy access to campus via walking or public transportation
Renovation must start within 90 days of origination and must be complete within 33 months
Planned upgrades must be between $10,000 and $25,000 per unit or $4,000 to $10,000 a bed
At least 25% and up to 50% of budget can be spent on unit interiors
Budget can be increased up to 20% without approval
Up to 75% of funds can be spent on exteriors
Eligible mixed-use properties supported
No refinancing test required
Appraisal must include as-stabilized values
Replacement reserves are generally required
Loans are not assumable
Additional rehabilitation escrow or completion guaranty required
Application fee and good faith deposit also required
Other Rehab Requirements:
Refinancing Test: Not required
Assumability: Not assumable
Prepayment Penalty: Loan can be paid off at any time with 1% penalty. No penalty if the loan is refinanced with Freddie Mac.
Advantages:
Disadvantages: