Chicago Apartment Loans
| Chicago Apartment Loan Rates Over $6,000,000 | Rates (start as low as) | LTV | |
|---|---|---|---|
| Apartment 5 Year Fixed Loan Rates | 5.90% | Up to 80% | Get Free Quote |
| Apartment 7 Year Fixed Loan Rates | 5.78% | Up to 80% | Get Free Quote |
| Apartment 10 Year Fixed Loan Rates | 5.64% | Up to 80% | Get Free Quote |
| Chicago Apartment Loan Rates Under $6,000,000 | Rates (start as low as) | LTV | |
| Apartment 5 Year Fixed Loan Rates | 6.16% | Up to 80% | Get Free Quote |
| Apartment 7 Year Fixed Loan Rates | 6.09% | Up to 80% | Get Free Quote |
| Apartment 10 Year Fixed Loan Rates | 5.97% | Up to 80% | Get Free Quote |
Frequently Asked Questions
Is multi-family real estate a good investment in 2023?
Inflation fears, high interest rates, and the prospect of recession have slowed the pace of the commercial real estate market considerably. Some property types are outperforming others. Apartment buildings in desirable neighborhoods are performing well, as owners have been able to raise rents and keep up with rising interest rates. Multifamily properties in smaller and less desirable areas, or areas where unemployment is rising, are not performing as well, as rent increases are harder to implement. In the office sector, only medical office buildings are generating lender interest. General office properties have underperformed the market as a result of the work from home policies established during the Covid-19 pandemic. Office demand is unlikely to return to pre-Covid levels making the office sector extremely hard to navigate right now. In the retail sector, essential service businesses, such as grocery stores and pharmacies, are performing well, while traditional brick and mortar retailers are still feeling the effects of Covid-19 and the competition from online retailers. Many malls are experiencing record high vacancy levels, and some are being repositioned for other purposes. In the industrial sector, we are seeing strong demand for warehouse and distribution space to accommodate the online retailers. Industrial space in urban markets and close to transportation are performing very well. We expect to see sales prices for underperforming properties to drop in 2023 as investors gravitate to better positioned properties.
There are many different types of lenders offering a myriad of different loan products to finance the acquisition or refinance of apartment properties nationwide. These lenders include agency lenders (Fannie Mae and Freddie Mac), local and national banks, insurance companies, credit unions and private lenders.
Most lenders write apartment loans for five, seven or ten years (fixed) with a 30 year amortization. It is also possible to obtain loans that are fixed for up to 30 years, although this is not the norm. Rates are typically based on a margin over the corresponding US Treasury rate.
Lenders offer non-recourse to strong borrowers and solid properties. The borrower will be expected to have strong credit, good net worth and liquidity, and experience owning and managing similar properties. The property will be expected to demonstrate solid long term positive cash flow, be in good to excellent condition, and be located in a strong market with low vacancy rates.
Apartment loans are typically screened and pre-approved in 2-3 days. Since lenders require appraisals, environmental and property condition reports, and title, closings will usually take 45-60 days from application.
How do we help our clients needing financing for a multifamily apartment building get the best rate and terms?
Select Commercial has excellent Chicago apartment loan products and options available for owners and purchasers in need of multifamily properties throughout the city of Chicago. Whether you need an apartment lender to finance a small apartment property, a complex with hundreds of units, or a co-operative, we can help you find the optimal apartment loan solution to meet your apartment loan needs. While we lend across the entire continental US, we are able to give our best rates and loan programs to certain areas that we feel are strong markets. Chicago is one of the cities that we consider to be a premium market and we actively look to originate good quality apartment loans here for our clients. We have a diverse array of many available loan products to help qualified borrowers looking to purchase or refinance an apartment property. We offer apartment loans with terms and amortizations up to 30 years, recourse and non-recourse, and many options for prepayment. We typically approve Apartment building loans within 1 day and usually close within 45 days of application. Our clients love our simplified application process, 24-hour pre-approvals with no-cost and no-obligation, great rates and terms, fast closings and personalized service. If you are looking to purchase or refinance an apartment building, don't hesitate to contact us. For more information on multifamily loans, check out how to get the best rate on a multifamily loan and how to get the best rates on an apartment refinance.
Apartment - Multifamily Loan Benefits
Chicago Apartment Loan rates start as low as 5.64% (as of September 26th, 2023)
• A commercial mortgage broker with over 30 years of lending experience
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on multifamily financing
• Terms and amortizations up to 30 years
• Multifamily loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation
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Apartment Loan Types We Serve
If you are looking to purchase or refinance a Chicago apartment building, don't hesitate to contact us. We arrange financing in the city of Chicago for the following:
- Large urban high-rise multifamily buildings
- Suburban garden multifamilycomplexes
- Small multifamily buildings containing 5+ units
- Underlying cooperative multifamily building loans
- Portfolios of small multifamily properties and/or single-family rental properties
- Other multi-family and mixed-use properties
Apartment Loan Helpful Articles
How to Get the Best Rate on a Multifamily LoanFannie Mae and Freddie Mac 2022 Update
How To Get The Best Rates On An Apartment Refinance
What Do Underwriters Look for When Evaluating Apartment Loans?
What You Need to Know About Freddie Mac SBL Multifamily Loans
How to Calculate Debt Service Coverage Ratio for Apartment Loans
Apartment Occupancy Levels – Concern in Some Major US Markets
How to Invest in an Apartment Building
Are You Shopping for an Apartment Building Loan?
How to Buy an Apartment Building
What Are Commercial Mortgage Lenders Looking for These Days
Uncomplicated Underwriting
How to Qualify for a Great Rate When Refinancing Your Apartment Building
Recent Multifamily Loan Closings
What are the market conditions expected for Chicago Apartment Loans in 2023?
Experts anticipate above average performance for the multifamily sector in 2023. Occupancy rates are expected to remain above 95% and rental rates are expected to grow by 4%. These figures are not as robust as the past couple of years, however, which saw vacancy rates under 3% and rent growth in the double digits. During the second and third quarters of 2022, leasing activity for apartment buildings was slow. This coincided with a solid pace of new multifamily deliveries to the market. The combination of slower leasing activity and heightened supply caused the overall vacancy rate to increase by 150 basis points in the middle portion of 2022. Throughout 2023, vacancy rates will likely continue to rise at a slower pace and move toward the 20-year average of 5%.
The overall multifamily housing demand is expected to remain strong in 2023. With inflation continuing to impact consumer spending, more and more renters are determining whether to renew their leases. While new leasing activity stalled throughout the middle portion of 2022, the overall multifamily demand remained pretty strong. The rise in home prices and residential mortgage rates is also helping to increase multifamily demand. Monthly payments for homes purchased in the third quarter of 2022 were, on average, 57% more than monthly apartment rents. That difference is the widest gap on record. Even if home values and mortgage rates decrease in 2023, the relatively lower cost of renting will support multifamily demand.
Rapidly rising interest rates on multifamily loans caused multifamily investment activity to slow down in the second half of 2022. Many buyers not willing to pay higher rates for apartment loans stepped out of the market. As apartment loan rates stabilize in 2023, many buyers will return to the market and look to finance apartment building investments with multifamily loans. The multifamily sector has historically been one of the most attractive sectors to investors. Over the past decade, the multifamily sector has seen average annual total returns of 9.3%. Additionally, this sector offers multifamily loan options from both Fannie Mae and Freddie Mac. These apartment loan options are not available for other asset classes. As the market stabilizes in 2023, more and more investors will look to acquire apartment buildings and finance them with agency apartment loans.
One other factor that caused the multifamily sector to stall in 2022 is that buyers expected cap rates to increase commensurate with the rise in interest rates, but sellers still expected higher prices. This caused many deals to simply not cash flow. Cap rates are expected to increase in 2023. With this increase, many buyers will have the option to finance acquisitions with apartment loans at more attractive prices.
Chicago Apartment Loan Outlook - 2022
Downtown Apartment Leasing Strong Despite Slow Job Recovery; Apartment Investors Wary of New Assessment Policy
Lack of new construction while waiting for workers to return to their offices affects vacancy and rent levels. Chicago’s apartment development level is slowing as construction costs rise due to supply chain and inflation fears. This along with strong renter demand is causing low vacancy and high rent growth in the city. The construction that is currently in process has been concentrated the in Downtown, Lincoln Park-Lakeview, and nearby areas, where demand for Class A apartments is strongest. These areas had the highest levels of absorption beginning 2022 as employees began to return to their offices and restaurants and other businesses reopened. In addition to the strong demand downtown, vacancy levels continue to decrease in suburban areas after falling below 4 percent in 2021. Payroll levels are still below the 2019 high, but the technology, finance, and corporate sectors provide jobs for high-income apartment. Employment in the leisure and hospitality sectors are still at 65 percent of 2019 levels, which will boost Class C vacancy levels once tourism picks up again.
Apartment investors are watching the downtown recovery in light of tax reassessment. Even though the inner city demonstrates strong demographics during the recovery, investors continue to consider areas outside of downtown. Tax reassessment changes in 2021 go into effect in 2022 with the expectation that apartment owners will pay higher rates than before. Real estate tax concerns have slowed sales volume downtown, but sales volume has remained strong in North Side, South Side and other suburban submarkets. The North Side from Old Town to Lincoln Square shows the strongest activity level in the market and has sales in all apartment classes, with cap rates here approaching 6 percent. Investors seeking sales prices below market average are buying lower-tier properties in the South Side area and getting cap rates in the range of 8 percent; however, these returns can increase even higher in areas farther from Lake Michigan toward South Chicago.
2022 Apartment Market Forecast and Chicago Apartment Loan Economics
Chicago has a National Multifamily Index of 37. An unimpressive employment recovery from the Coronavirus pandemic adds to the bottom 10 ranking for the city of Chicago.Employment in Chicago is up 2.7%. Job growth is expected to slow in 2022 with 122,500 anticipated new jobs. Total employment is well below the pre-pandemic 2019 peak.
Construction expected to add 6,500 new units. This is a slight increase from the 6,200 units added during 2021, but the 2022 projection is approximately 2,000 units below the five-year trailing average.
Apartment vacancy is down 20 basis points. The Chicago apartment vacancy rate will fall to 3.7 percent by the end of 2022. The last time Chicago’s year-end vacancy rate fell beneath this level was in 2000.
Rents are up 4.2%. The average effective apartment rent rises to $1,720 per month as low availability, limited construction, and anticipated tax increases drive rent growth in 2022.
Apartment investment near the city center should return as details of the tax reassessment policy are understood and upon tightening vacancy rates in the reassessed submarkets.
Chicago apartment loan rates will start to increase in 2022 as the Federal Reserve starts raising rates to slow the rate of inflation. We will be watching to see if Chicago apartment loan rate increases will affect market activity in 2022.
All data provided by Marcus and Millichap
Chicago Apartment Market and Trends - 2021
Rental demand in Chicago’s urban core significantly decreased in 2020, as businesses shut down or had employees work from home during COVID-19. Many people looked for less expensive and larger homes outside of the urban center that could accommodate remote work. In specific, rental demand in the Streeterville-River North and the Loop areas went down the most. These two markets each received more than 2,000 new multifamily units in 2020. Given the lower demand, vacancy soared around 400 basis points to metro highs in each market. In 2021, experts anticipate an improvement in rental demand due to both a slower delivery pace and widespread vaccinations that allow workers to return to offices.
During COVID-19, the suburban markets of Chicago actually did quite well. Unemployment caused many renters to look for cheaper housing, and many people working for home sought larger apartments in the suburbs. Vacancies decreased by over 100 basis points in the Will County and Merrillville-Portage-Valparaiso submarkets. In fact, South Cook County had the city’s lowest vacancy rate of 2.8 percent, a reduction of 70 basis points year over year. Experts have said that with a downtown revival in Chicago, additional investors will be drawn to multifamily assets in the city in 2021.
In 2021, there is expectation that employment should grow about 2.6 percent in the city. However, the total employment level will remain more than 200,000 jobs below the pre-Covid-19 pandemic level. Therefore, Chicago’s unemployment rate in 2021, which sat at 8.2 percent at the end of 2020, is likely to stay above the national rate. In 2021, deliveries are expected to decrease to the lowest level in more than five years. Total inventory is expected to expand by only 0.8 percent in 2021. This is down from a 1.1 percent gain last year. The majority of the rentals due in 2021 are located in the suburbs. Following a slow absorption pace in 2020, Demand for rentals is set to outpace inventory additions in 2021. This should lead to a contracting of the vacancy rate down to 5.3 percent in 2021. This is a significant improvement from last year when the vacancy rate jumped 100 basis points. A growing demand for apartments in Chicago in 2021 is set to push rents higher. By the end of 2021, the average effective rent in Chicago is expected to sit at $1,498 per month. While the rate is up year over year, it remains below the recent peak of $1,580 achieved during 2019.
Apartment Loan Outlook - 2021
The COVID-19 pandemic affected the ability of young graduates to find jobs and move into apartments of their own. The demand for apartment rentals is usually fueled by young graduates entering the workforce and moving into rental apartments. Many young adults lived with their parents or friends during the pandemic and into early 2021. As 2021 progressed, many companies reopened their offices and began hiring again which generated record levels of new apartment rentals. This trend should continue through late 2021 as more new workers are able find jobs and move into their own apartments. Many of these new multifamily units are in metro areas of the sunbelt states as workers have been moving out of colder urban areas in favor of more suburban warmer climates.
The tight market in 2021 for new home purchases has caused many would be homebuyers to continue renting. Prices for existing homes have risen due to lack of inventory and the cost of construction has skyrocketed due to increased costs for raw materials. The high cost of purchasing a new or existing home is keeping the demand for rental units very strong in 2021.
During the pandemic, when workers were either out of work or working from home, many people moved out of densely populated urban areas in favor of suburban locations. In 2021, as more employees are returning to their offices, we are seeing demand pick up once again for rental apartments in urban locations. In addition, as more and more retail and dining locations reopen in downtown areas, we expect to see a return of employees to these areas.
During the pandemic, the CDC and local governments instituted a moratorium of evictions. This caused many landlords to suffer economic losses and depressed the value of apartment properties. In 2021, as these moratoriums start to expire, we expect to see strong demand from investors for these properties.
Nationwide, the first half of 2021 saw more than 175,000 new apartments completed and a total of 363,000 for the previous 12 months. A high percentage of these new units were in Texas and other sunbelt states, as more and more people are relocating to warmer climates. Occupancy rates and asking rents have been lower in larger urban markets in the Northeast and other colder climates, while occupancy rates and asking rents have been increasing in these warmer sunbelt climates. These 2021 trends have definitely been driven by the COVID-19 pandemic and we are watching these trends closely to see if these trends persist after the pandemic is over. Check out our low commercial real estate loan rates and use our commercial mortgage calculator to calculate monthly principal and interest.
Chicago Freddie Mac Apartment loans
Chicago Freddie Mac Multifamily Loans provide mortgage capital in the secondary market for apartment building loans. Together, Fannie Mae and Freddie Mac control a very large portion of the multifamily loan market. Freddie Mac has a very aggressive program for small balance apartment loans (from $1,500,000 to $25,000,000+). Some features of this program include:
- Market size driven. Freddie Mac classifies loans by the size of the overall market: Top, Standard, Small, and Very Small. Rates are best in top market locations (major metropolitan areas).
- Capped costs. Freddie Mac lenders often cap the closing costs at a fixed dollar amount, thereby lowering the overall cost to borrow money.
- Flexible pre-pay penalties. Freddie Mac offers many options for pre-payment penalties, from yield maintenance to step-down to “soft” step-down.
- Interest-Only (I/O) loans. Freddie Mac will allow payments consisting of only interest and no amortization of principal.
- Fixed rate terms. Freddie Mac offers fixed rates of 5, 7, and 10 years, followed by an adjustable period. These loans are called Hybrid/Adjustables. Loans have a 20 year term and a 30 year amortization schedule.
Freddie Mac Loan and Rate Information
Chicago Fannie Mae Apartment loans
The Chicago Fannie Mae multifamily loan platform is one the leading sources of capital for Chicago apartment building loans in the US. Fannie Mae is a leader in the secondary market – meaning they purchase qualifying apartment loans from leading lenders who originate these loans for their borrowers. Fannie Mae purchases loans secured by conventional apartments, affordable housing properties, underlying cooperative apartment loans, senior housing, student housing, manufactured housing communities and mobile home parks on a nationwide basis. The Fannie Mae platform has many benefits, including:
- Long term fixed rates and amortizations. Fannie Mae allows terms and amortizations of up to 30 years. Most banks offer only 5 or 10 year fixed rates and 25 year amortizations.
- Non-recourse options. Most banks will require the borrower to sign personally for the loan. Fannie Mae offers non-recourse apartment loans.
- Lending in smaller markets. Many national lenders do not like to lend in rural or tertiary markets. Fannie Mae is a good option for these loans.
- Assumability and Supplemental Financing. Fannie Mae allows their loans to be assumed by a qualified borrower. They also have a program which allows borrowers the ability to come back and borrow additional funds during the life of the loan (subordinate financing).
Fannie Mae Loan and Rate Information
Chicago FHA Multifamily Loans
FHA multifamily loans are some of the best financing options for real estate investors and developers. While HUD does not directly make these loans, they do insure multifamily loans made by third party lenders to real estate investors. The third party lender will process the loan in accordance with the FHA HUD guidelines and FHA will underwrite the loan in order to provide the insurance. There are two primary types of FHA insured loans that multifamily investors can take advantage of.
Learn More About FHA Multifamily Loans
Chicago HUD Multifamily Loans
HUD multifamily loans are some of the best financing options for real estate investors and developers. While HUD does not directly make these loans, they do insure multifamily loans made by third party lenders to real estate investors. The third party lender will process the loan in accordance with the FHA HUD guidelines and HUD will underwrite the loan in order to provide the insurance. There are two primary types of HUD insured loans that multifamily investors can take advantage of.
Learn More About HUD Multifamily Loans
Chicago Apartment Loans with Banks and Other Programs
While the agencies (Fannie Mae, Freddie Mac and HUD) offer some excellent programs, not every apartment loan applicant qualifies for these programs. We have many excellent choices for these loans with our correspondent banks, credit unions, insurance companies and private lenders. Some examples of these loans include:
- Chicago Multifamily loans that require flexible underwriting or those that don’t meet standardized criteria.
- Properties in less than desirable markets, or those that require repairs or updating.
- Properties that don’t cash flow according to industry guidelines or lack stabilized cash flow.
- Borrowers with past credit issues, including foreclosures, short sales, or judgements.
- Borrowers who are not US citizens.
Whether you are purchasing or refinancing, we have the right solutions available for your multifamily mortgage loans. We will entertain apartment loan requests of all sizes, beginning at $1,500,000. Get started with a Free Commercial Mortgage Loan Quote.
Chicago Apartment Loans
Select Commercial provides apartment loans throughout Chicago, Illinois including, but not limited to, the areas below. We provide apartment loans in most major cities throughout the United States.
Addison • Glen Ellyn • Northbrook • Algonquin • Glenview • Oak Brook • Arlington Heights • Gurnee • Oak Lawn • Aurora, • Putnam • Oak Park • Barrington • Bolingbrook • Orland Park • Bartlett • Hanover Park • Rolling Meadows • Batavia • Highland Park • Round Lake Beach • Bolingbrook • Hinsdale • Schaumburg • Buffalo Grove • Joliet • St. Charles • Carol Stream • Lake Forest • Tinley Park • Des Plaines • Lombard • Waukegan • Downers Grove, • Morton Grove • Westmont • Elgin • Mundelein • Wheaton • Elmhurst • Naperville • Wheeling