Despite the demand for single-family homes, many remain out of the price range of the average buyer, including potential first-time buyers, which means that renters are continuing to rent in this economy. On the flip side, these trends have ushered in a boom in the multi-family real estate market. Commercial developers have taken advantage of this situation and are now focusing their energies on apartment complexes and multifamily dwellings with a minimum of five units. But what does it all mean for lenders?
According to the latest residential construction report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, there was a 26.5% increase in completed multifamily buildings with five or more units in February 2017 when compared to February 2016. In addition, when compared to January 2017, such dwellings had increased a whopping 39.3%. Construction on properties in this category has also increased by 14.0% this February over the same period a year prior.
So how can lenders take advantage of this situation? By following the trend. This pace of rental-unit absorption will continue to be the status quo, especially in urban centers. With several multifamily developers bidding against each other for a piece of the pie, commercial lenders stand to benefit handsomely. The biggest ally for the borrower in such a competitive space will likely be private lenders. These companies can quickly finance several bridge loans at once, as their high-risk model requires significant collateral, which can easily be provided by established commercial developers. This allows the buyers to secure financing and get to work, and private lenders should see great returns on their multiple high-interest loans. Kennedy Funding Financial, for example, has extensive experience financing large commercial real estate projects, closing over $2.5 billion in loans in the company’s history.
In the multifamily real estate gold rush, private lenders are uniquely positioned to outmaneuver the traditional banks and lenders and profit substantially as a result.