occupancy required for agency financing
my firm is selling a multifamily property. any idea what occupancy is required for a prospective buyer to attain agency financing? getting conflicting information from brokers
thanks in advance.
Not sure if there is a hard requirement. I have seen pre-stabilized deals get financing with lease-up riders that required the principals to provide additional security (LOC) which burns off when certain occupancy and debt coverage thresholds are met
95%, typically.
There are markets all over the country with 10% vacancy. Agency lending still gets done.
I had a deal in SoCal with 15% vacancy get done. It was during a remodel.
Depends on sponsor, but the Fannie prestab program can do 75% occupied if not lower. Some of the Life Cos have programs that will basically do an expensive mezz loan to get you through stabilization when you can convert to perm at a rate you would fix now.
Recently taken out by an agency lender in a tertiary market who had a 90% requirement. Highly anecdotal and it varies.
Freddie has tons of different products, depends on different things. Working on deals around 50% right now
Be careful, being experienced might get you monkey poo bro, lol
What market is the property located in? What is the property size? Vintage? Does the borrower have adequate NW/Liquidity to meet agency requirements (usually 1x loan amount for Net Worth and 10% of loan amount for liquidity.)
For Fannie:
Near Stab: Property has to be at least 75% physically/60% economic occupied. If it is a large property in lease-up, it has to hit 75% occupied and meeting the required DSCR with 120 days of the loan closing. If its a smaller property, you are on the DSCR if it has a strong lease-up trajectory.
For conventional properties: occupancy must not have been below 85% for the past three months. If there is a good story as to why, such as renovation, fire, etc. then you can ask Fannie for a waiver.
For Freddie:
Most of my experience is on the Fannie side, but I can reach out to get Freddie equivalent answers if needed. I currently work in agency lending.
PM me with more questions.
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