Multifamily Financing

Multifamily real estate remains one of the most lucrative and scalable investment options. With multiple income streams coming from a single asset, multifamily properties offer investors a stable income with long-term wealth-building potential.

Multifamily financing offers a customized solution to help investors access these investment opportunities. This guide explores the details of multifamily financing, including qualification requirements, key metrics, and the perks of owning these types of rental properties.

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What is Multifamily Financing?

Multifamily financing refers to loans used to purchase or refinance residential properties consisting of multiple separate units. Unlike single-family homes, which typically house one family, multifamily properties can accommodate two or more. This provides property owners with multiple rental income streams from one asset.

Small multifamily properties contain 2 to 4 units, which can qualify for residential mortgages, including conventional loans, and sometimes FHA loans or VA loans (based on eligibility). Otherwise, investors may look to other loan programs that are designed specifically with investors in mind, like DSCR loans or long-term rental loans.

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TermConforming 30 year fixed

Rate6.000%

APR6.227%

98004 | $800,000 | Credit Score 800+ | 25 Down

TermConforming 15 year fixed

Rate5.125%

APR5.493%

98004 | $800,000 | Credit Score 800+ | 25 Down

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What Are the Eligibility Requirements For Multifamily Mortgages?

Lenders assess the following factors as part of the vetting process:

Investor Experience

Lenders may prefer borrowers to have some experience owning & managing multifamily properties

Creditworthiness

Borrowers should have a credit score of at least 620+ to qualify

Down Payment

15% — 30% is typical for residential investment properties

Loan-to-Value (LTV)

Typically capped at 75% — 80%

Property Value

Property value plays a role in loan approval and interest rates

Financial Performance

Lenders will look at the following metrics to determine the property’s financial strength: Actual/expected rental income; Debt Service Coverage Ratio (DSCR); Occupancy rates

Documents Required For Multifamily Financing

Lenders typically require the following documentation:

Personal and business tax returns: Lenders use tax returns to assess financial stability, income history, and debt obligations.
Rent rolls: Lenders want to ensure the rent collected more than covers the property’s operating expenses.
Operating statements: Along with rent rolls, operating statements provide a snapshot of actual income and expenses, including taxes, insurance, repairs, and management fees.
Credit report: Your personal credit score matters, even if the loan is under an LLC.
Property appraisal: An appraisal determines the market value of the property and ensures the loan amount is justified.

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Tax Perks of Multifamily Investing

Investing in multifamily properties comes with several tax advantages:

Depreciation: Property owners can deduct a residential property’s value over 27.5 years.
Mortgage interest deduction: Investors can write off the mortgage interest paid on the loan.
Operating expense deductions: Property management, repairs, insurance, and other related expenses may be deducted.
1031 Exchange: Investors can defer capital gains by reinvesting the proceeds of the sale of their properties in another like-kind property.

Always consult a tax advisor to maximize your benefits while remaining in compliance with IRS rules and regulations.

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FAQs

Can I buy a multifamily home with 3.5% down?

Yes, if the property has no more than 2–4 units and you plan to live in one unit, you may qualify for an FHA loan with 3.5% down.

Can I use a DSCR loan for multifamily investments?

Yes, DSCR loans are suitable for properties that generate cash flow.

Can a VA loan be used to finance a fourplex?

Yes, as long as you meet VA eligibility criteria and live in one of the units.

How can I finance multiple properties?

If you’re looking to grow your portfolio with multiple investment properties, you may want to consider portfolio loans or blanket loans.

How much down payment is required?

Expect to put down 15% to 30%, depending on the loan type, property size, and your experience. If the property has 4 units or less, you may be able to put down much less with a FHA or VA loan.

Can I use expected rental income to qualify?

Yes, lenders may look at appraisals or market rent surveys to assess the property’s potential.

Where are multifamily properties more popular in the Pacific Northwest?

In Washington, Seattle, Tacoma, and Spokane are prime markets for multifamily property investment, thanks to their strong local economies and steady rental demand. Over in Oregon, Portland’s thriving tech industry and Bend’s outdoor lifestyle appeal are fueling investor interest in those regions.

Do all lenders offer multifamily financing?

No, not all lenders offer multifamily financing, especially for properties with 5+ units. You’ll have to work with a specialized mortgage lender, like Sammamish Mortgage, that understands investment property structures.

States we lend in

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Final Thoughts

Multifamily properties present one of the best ways to build long-term wealth, earn a steady income, and diversify your real estate portfolio. No matter what type of multifamily property you’ve got your sights set on, the key to success lies in selecting the right financing strategy. Be sure to work with a mortgage company that understands your goals and can help structure the right financing solution for you.

Need Financing?

If you’re a real estate investor looking to acquire a multifamily property in the Pacific Northwest region, we can help you finance this purchase. At Sammamish Mortgage, we offer various investor mortgage home loan programs in WA, OR, ID, CO, and CA. Visit our website to get an instant rate quote, or get in touch with us today to have your mortgage questions answered!

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