Analysis

Small Multifamily Investment Snapshot — March 2025

Amid ongoing macroeconomic uncertainty, the small multifamily sector remains favorably positioned for stability as the structural need for affordable housing in the U.S. has supported the strength of the sector’s demand profile.

Articles

Top Markets for Rental Occupancy

Nationally, vacancies have risen, but the performance of rental housing is extremely localized. Out of the 75 largest U.S. metropolitan areas, the occupancy rate for all types of rental properties, including single-family rentals, 2-4 family, multifamily, and mobile homes, increased in 36 markets last year, while exceeding 95% in nearly one-third of all markets, according to an analysis of newly released U.S. Census Bureau data.[1] From Grand Rapids, MI, to Columbia, SC, the top markets for rental occupancy show where conditions are tightest and demand is strongest.

Current Reports

Single-Family Rental Investment Trends Report Q1 2025

Arbor’s Single-Family Rental Investment Trends Report Q1 2025, published in partnership with Chandan Economics, is an up-close look at the single-family rental (SFR) sector as it enters a period of normalcy after explosive pandemic-era growth. SFR maintains its balance with the support of a healthy set of fundamentals while capital markets rebound and rent growth moderates.

Articles

Small Multifamily Price Growth Trends Show Stabilization

Small multifamily price growth trends indicate a stabilization may be ready to take hold. Expanding on the findings of Arbor’s latest Small Multifamily Investment Trends Report, our research teams more closely examined valuations to determine if trends in pricing and other fundamentals are supporting a turnaround.

Articles

SFR Rent Growth: Top Markets and Leading Regions

Elevated mortgage interest rates and high home prices boosted demand for single-family rentals (SFR) last year, supporting the growth of rents in almost all of the 100 largest metropolitan areas. Pricing momentum, which averaged 4.5% nationally, was concentrated in affordable markets in the Northeast and Midwest, an analysis of Zillow’s Observed Rent Index data shows.

Articles

Build-to-Rent’s Robust Activity Settles into Stable Pattern

Increasingly, single-family rental (SFR) operators have been relying on build-to-rent (BTR) development to satisfy their inventory needs. The popularity of BTR communities made economies of scale possible for the SFR sector in the recovery after the 2007 housing crisis and continues to fill a housing need nationwide. Now, newly released U.S. Census Bureau data shows that SFR development activity remained robust even as its momentum slowed, moving the sector into a more stable equilibrium.

Articles

Advancing Sustainability in CRE Finance in a Shifting Landscape

With political headwinds reshaping the corporate responsibility landscape, commercial real estate (CRE) leaders, policymakers, and academics recently gathered in New York City for the NYU Stern Chen Institute for Global Real Estate Finance’s 3rd Annual Symposium on Innovation & Sustainable Real Estate to discuss the future of sustainable real estate finance, investment, operations, and technology. In a series of panel discussions, industry leaders offered their perspectives on how sustainability is evolving in a new political environment and why green policies still make business sense.

Articles

Dr. Sam Chandan Sees an Opportune Moment Emerging for Multifamily Buyers

Rental housing remains uniquely positioned for continued growth in an environment of economic volatility and political uncertainty, Dr. Sam Chandan, founding director of the C.H. Chen Institute for Global Real Estate Finance at the NYU Stern School of Business and founder of Chandan Economics, asserts in his video overview of Arbor’s Special Report Spring 2025.

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Home | Freddie Mac | Value-Add Loan
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FREDDIE MAC®

Value-Add Loan

• Offers short-term, cost-effective financing for modest property upgrades ($10,000 to $25,000 per unit)
• Enhanced to improve property financing for rehabilitation work
• Competitive pricing; lower execution costs
• Interest-only and uncapped floating-rate loan
• Non-recourse and “one-stop shopping” for upgrades and permanent financing

Terms
  • Three years with one 12-month extension based on the borrower’s request and one optional 12-month extension based on Freddie Mac’s discretion
  • Floating-rate loan with full-term interest-only; no cap required
  • Standard 12-month lock-out with option for longer or shorter lock out based on borrower’s preference; borrower may pay off the loan at any time after the expiration of the lock-out period but must remit an exit fee of 1%; the exit fee will be waived if the loan is refinanced with Freddie Mac
  • Acquisitions and refinances; not assumable
  • Loan documentation at origination will include the Value-Add Rider, which will detail the terms/requirements of the rehabilitation
  • Escrows will include real estate taxes, insurance, and replacement reserves
  • 15% cash equity generally required
  • For longer-term ownership, cash-out is available provided a Completion Guaranty on budgeted improvements in an amount at least equal to the cash-out in place
Upfront Fee Standard 0.5% of loan amount nonrefundable upfront fee subject to adjustment depending on loan terms
Eligible Borrowers
  • Developers/operators with experience in multifamily property rehabilitation and in the local market with sufficient financial capacity
  • 1.5x the standard minimum net worth and liquidity requirements for guarantors
Eligible Property Types
  • Properties with no more than 500 total units in good locations
  • Well-constructed properties requiring modest repairs
  • Market laggards that require capital infusion and new/improved management
  • Real-estate owned properties in receivership that are capable of improved performance
  • Seniors housing, student housing and manufactured housing communities are not eligible
Amount
  • Maximum loan-to-purchase / loan-to-value (LTV) ratio: 85%
  • Minimum amortizing debt service coverage ratio (DSCR): 1.10x – 1.15x depending on market
  • Sizing based on a 7-year sizing note rate
  • Appraisal must include as-is and as-stabilized values; underwriting must support a 1.30x DSCR and 75% LTV based on as-stabilized value supported by the appraisal
  • Standard Freddie Mac underwriting based on as-is income and expense
  • Refinance Test not required
  • No pro-forma underwriting of future performance
Rehabilitation
  • Rehabilitation must commence within 90 days of loan origination and be completed within 33 months
  • Acceptable budget of $10,000 per unit to $25,000 per unit
  • Budget can be adjusted by as much as 20% without additional approval; 50% of the budget should be spent on unit interiors
  • Completion Guaranty or rehabilitation escrow required
  • Borrower/Servicer reporting required
At Loan Maturity/Refinance
  • Final engineer review of work completion and quality is required
  • Refinance with Freddie Mac with no exit fee; otherwise 1% applies
  • Freddie Mac will re-underwrite the loan according to then-current credit policy parameters
  • One-year borrower extension option is available for a 0.5% extension fee, assuming no event of default
  • Additional Freddie Mac extension option is available thereafter with a 1% extension fee
Fees Standard fees apply, including application fee and good faith deposit.

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