Freddie Mac Student Housing Value Add Multifamily Loans

Many student housing properties require rehab in order to make sure the property is up to par. The Freddie Mac Student Housing Value Add multifamily loan program offers investors a great financing solution to easily finance light repairs on their buildings. These loans are specifically crafted for student housing developments with planned repairs of between $10,000 to $25,000/unit. The loan terms on the Freddie Mac Student Housing Value Add Multifamily Loans program are pretty remarkable. They include LTV of up to 85%, interest-only terms and are non recourse. If you an investor in need of light rehab on your student housing property, this loan program

Freddie Mac Student Housing Value Add Multifamily Loan Highlights

Use:  Generally for acquisitions and refinances of eligible Student Housing properties which need moderate upgrades of $10,000 to $25,000 per unit

Terms: 36 months with one 12-month extension (per borrower’s request) and one optional 12-month extension (per Freddie Mac’s discretion)

Interest Rate: Loans come with a floating-rate loan and full-term interest-only. There is no rate cap required.

Maximum LTV/ Minimum DSCR: 85%/1.2x

• Appraisal needs to include both as-is and as-stabilized values. Additionally, underwriting must support a 75% LTV and 1.35x DSCR based on as-stabilized value

Recourse: Non-recourse with standard carve outs for “bad boy actions”

Prepayment Penalty:  Loan is eligible to paid off at any time with a 1% penalty. No penalty if the loan is refinanced with Freddie Mac. 

Eligible Borrowers: Borrowers must have solid experience and expertise with comparable student housing deals. Guarantors must have 1.5x the standard minimum net worth and liquidity requirements.

Eligible Properties:

• Properties must have no more than 250 total units or 625 beds
• Properties must be well-constructed and in need of modest repairs
• Real-estate owned properties in receivership which should have improved performance with slight rehab work
• School must have a minimum of 15,000 student enrollment. This is greater than the standard student housing policy minimum of 8,000.
• Buildings must be within 2 miles of school campus
• Properties must have convenient access to campus by either public transit, shuttle or pedestrian access.

Rehab Requirements:

• Rehab must begin within 90 days of loan origination
• Rehab must be completed within 33 months of loan origination
• Loans will require a scope of work. Rehab budget must be between $10,000 - $25,000 per unit or $4,000 - $10,000 per bed.
• Budget must set aside at least 25% to interior improvements
• Budget can be adjusted up to 20% without additional consent by Freddie Mac
• Up to half of the total budget is allowed to be used for unit interiors

Other Considerations:

• Loan is not assumable
• No lock out period
• For longer term ownership, cash-out is available assuming a completion guaranty on budgeted improvements in an amount at least equal to the cash out funds is in place