Articles

What Is Driving Lifestyle Renter Demand?

Lifestyle renters — those who have the means to own but prefer to rent or are willing to pay more for apartments with amenities — have become a key driver of rental demand in single-family rental homes, build-to-rent communities, and other types of high-quality multifamily housing. With this small yet influential demographic growing, our research teams examine and explain the factors driving lifestyle renter demand.

Articles

Build-to-Rent Well-Positioned to Fill Housing Market Gap

With nearly one-fifth of multifamily properties now over 65 years old, it’s time to consider solutions for rejuvenating the rental housing stock in the U.S. While building rehabs are a tried-and-true solution, build-to-rent (BTR) is an alternative that is well-positioned to expand as Americans increasingly favor renting over homeownership.

Articles

U.S. Added 514,000 New Rental Households in 2023

In a year when inflation and elevated interest rates weakened affordability, the rental housing sector strengthened and expanded. An analysis of newly released U.S. Census Bureau Housing Vacancies and Homeownership data shows the number of rental households climbed in 2023.

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Articles

Build-to-Rent Construction Starts Surge to New High in 2023

Over the last decade, single-family rental (SFR) operators have been increasingly focusing on build-to-rent (BTR) development as the needs and preferences of renters have shifted. As explored in the latest Arbor Single-Family Rental Investment Trends Report, SFR/BTR development has surged at a time when new, for-sale, single-family home starts have declined.

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FRDDIE MAC®

Moderate Rehab Loan

Arbor provides the capital you need to renovate your property at the lowest cost possible. During renovation, the loan can be an interest-only floating-rate debt, and loan proceeds are advanced monthly as requested rather than accruing interest on unused funds. The terms are highly negotiable, allowing for variation in borrower terms and structure needs. These loans offer a flexible liquidity source for experienced and well-capitalized sponsors who have successfully completed rehabilitation projects of similar scope and who are familiar with the loan process.

Loan Terms
  • Deal specific/negotiated
  • Interest-only during the Interim Phase
  • Hedge: Uncapped during the Interim Phase; cap required if converted to a floating rate Permanent Phase
Eligible Borrowers Experienced and well-capitalized sponsorswho have successfully completed rehabilitation projects of similar scope and who are familiar with the Freddie Mac loan process.
Eligible Properties Types
  • $25,000-$60,000 in renovations per unit with a minimum of $7,500 per unit designated for interior work
  • Minimum occupancy: Rehabilitation plan may not take debt service coverage ratio (DSCR) below 1.0x on an interest-only basis
  • Not eligible – seniors housing, student housing, MHC, preferred equity with hard pay, and mezzanine financing
Amount Loan-to-value (LTV) ratio:

  • Fund up to 80% of the as-is value, supported by the property acquisition price, if applicable
  • Periodic draws of unfunded loan proceeds (as opposed to an escrow) to reimburse the sponsor for up to 80% of the renovation costs on a monthly or quarterly basis as work is completed, similar to construction financing
  • Appraisal must demonstrate 80% as improved LTV (with fully funded renovation proceeds)

 
Debt service coverage ratio (DSCR):

  • Initial sizing – 1.20x interest only “as is”
  • An improved underwritten net operating income (NOI) per appraisal must reflect no less than 1.30x amortizing debt service coverage ratio (DSCR) and will be subject to appraisal support
Rehabilitation
  • Additional documents: Freddie Mac Disbursement Agreement, Disbursement Servicing Agreement, Operating Deficit Agreement & Completion Guaranty for 80% of approved budget and all work initiated, construction scope, budget and schedule
  • Pre-Construction Analysis Report: Must provide opinion to whether construction plan can reasonably be completed within the budget and schedule
  • Draws: Released upon request, but no more than once a month; first draw will be based on a certificate from the Servicer to Freddie Mac confirming that the request complies with the requirements set forth in the Disbursement Agreement (including but not limited to inspections, lien waivers and standard documentation); subsequent draws will require additional certifications as well as Freddie Mac’s independent confirmation of the information/documents supporting the prior certification. 5% retainage of draws are held and released once satisfactory confirmation of completion of all budgeted work has been received.
  • Monitoring: In addition to the draw certificates noted above, monitoring to reflect quarterly progress reports and inspections including rent rolls and operating statements.
  • Timing: All units must be habitable by 6 months prior to conversion to the Permanent Phase, and all renovation work is expected to be completed by 3 months prior to conversion to the Permanent Phase.
Structure
  • Loan type: Float-to-Float or Float-to-Fixed.
  • Conversion: FInterim Phase is floating, followed by either floating or fixed Permanent Phase; note rate to be determined at loan origination.
Prepayment
  • Float-to-Float: 2% prepayment premium during Interim Phase; standard Freddie Mac prepay structures available thereafter.
  • Float-to-Fixed: Yield Maintenance during Interim Phase; standard Freddie Mac prepay structures available thereafter.
Fees Standard fees apply, including application fee based on fully funded loan amount and good faith deposit.

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