Los Angeles Apartment Building Loans

Los Angeles apartment building loans prove the most competitive type of loans in the commercial mortgage market. Apartment mortgage lenders are willing to compete on apartment financing rates and terms. RIO Commercial generates financing competition by shopping apartment building loan requests to a wide variety of apartment lenders.

Typical Apartment Building Financing Terms

Maximum loan to value:	Apartment buildings are most frequently financed at 80% of value or cost (whichever is lower). For apartment loans under $2M, there are a few lenders who will go to 85% or 90% or will allow secondary financing for a combined loan to value of 85% to 90%. For long term fixed rate loans a small "mezzanine" piece can be added to the loan to yield an 85% LTV.
Debt service coverage:	The cash flow from operations must be at least 1.20 times the apartment mortgage loan payment.
Term:	5, 7, 10, 15, 20 year terms are most common.
Amortization:	25 or 30 years if apartment building is in good repair
Typical Apartment Loan Rates:	10 year fixed = 10 yr US Treasury bill rate + 1.0% to 1.5% 15 and 20 year fixed = 10 yr Treasury + 1.5% to 2.0%> 5 year fixed = 5 yr Treasury + 1.5% to 2.0% ARM = LIBOR + 1.5% to 2.0%
Occupancy requirements:	Most lenders require 90% apartment building occupancy for 90 days in order to qualify for a permanent loan.
Prepayment terms:	10, 15, 20 year fixed rate apartment building mortgage loans - typically have prepayment based on "yield maintenance" or "defeasance". This kind of prepay can make it prohibitive to refinance or sell the property (prepayment fees can easily exceed 10% to 15% of the loan). Some lenders offer a reduced prepay for an increase rate (e.g. for 0.5% increase in rate the prepay can be a decreasing amount each year (e.g. 10%, 9%, 8%.....3%, 2%, 1% for the first ten years). 5 yr fixed rate loans - typically have a decreasing prepayment each year (e.g. 5%, 4%, 3%, 2%, 1%). Adjustable rate loans - typically have a decreasing and smaller prepay (e.g. 3%, 2%, 1%).
Recourse:	Apartment building loans may or may not require recourse (personally guarantee).
Closing costs:	Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal, Phase 1 Environmental, site inspection, title, etc) Apartment building loans under $3M - costs range from $6,000 to $12,000 For apartment building loans over $3M - costs can be $20,000 or more

** These are NOT terms of any specific lender and merely a representation of terms most often used in the marketplace. Do not rely on the above as a commitment to provide any specific terms on any specific deal. **