Multifamily term loans can serve two major purposes for apartment investors: purchasing a stabilized property or refinancing one already in their portfolio. Although both transactions use long-term financing, the lender’s evaluation changes depending on whether you are acquiring a new asset or restructuring existing debt. Understanding this difference can help you choose financing that matches your investment objective.
For an acquisition, the loan is tied directly to the property purchase. Lenders typically review the purchase price, net operating income, occupancy, rent roll, operating expenses, condition, and appraised value to determine whether the property can support the proposed debt. Because the transaction has a closing deadline, you also need to complete due diligence and financing within the purchase timeline. If the property is stabilized and producing consistent income, a term loan can provide long-term financing for the acquisition. If it has low occupancy or requires substantial renovation, transitional financing may be more appropriate before moving into a term loan.
A refinance starts from a different position because you already own the apartment building. The lender can evaluate actual operating performance, current NOI, occupancy, rent roll, property value, and existing debt. You may refinance to obtain a better rate, extend the loan term, restructure payments, or access equity through a cash-out refinance. If you previously used bridge financing to renovate and stabilize the property, a term loan can also provide the long-term financing needed to replace that temporary debt. When comparing multifamily term loans, consider not only the rate but also DSCR requirements, closing costs, prepayment terms, leverage, and your expected holding period.
The right financing ultimately depends on what you are trying to accomplish. Acquisition financing helps you add a stabilized income-producing property, while refinance financing helps you improve or restructure the debt on an existing asset. Before choosing, stress-test the property’s income and expenses and make sure the proposed loan supports your longer-term investment strategy.
