Recently, HUD announced changes to multifamily financing that are anticipated to make a good deal even better. As NREI reported earlier this week, HUD has declared they’ll be permanently relaxing the “three year rule” for multifamily refinancing. We look at what this means, and why HUD is nothing new to BAM in today’s BAM Blog…

According to the NREI piece, which you can read in its entirety here, the new policy will remove the old restriction: previously, a property had to sit or “season” from the certificate of occupancy for three years before it was eligible for a mortgage loan application. Now, that restriction is gone, meaning that real estate investors can apply for long-term HUD financing without waiting for the three-year period to expire. In the NREI article they note in order to take advantage of HUD’s new relaxed borrowing policy, a property must be fully leased, and have sustained occupancy for one month – instead of three years – before applying. As with other HUD financing, the loan time frames are lengthy: borrowers can secure a term loan for up to 35 years.

As we’ve discussed before, HUD and other non-bank lenders like Fannie Mae and Freddie Mac are sources of funding BAM often utilizes – and for good reason. For example, banks typically lock in an interest rate for 5-7 years, possibly longer; however, they charge a high rate to do so! Meanwhile, by using Fannie, Freddie, or HUD a borrower can lock in a rate of 10-15 years. With HUD, 35-40 year rate locks are possible! While some people may associate HUD specifically with low-income properties, they actually offer financing for every asset class including luxury assets.

BAM founder and CEO, Ivan Barratt, has mentioned previously that in order to take advantage of HUD’s financing you have to deal with the red tape and hoops involved; however, once you do the benefits are enormous – and being able to lock in an interest rate for 35 years with a 35-year amortization period takes a lot of risk off the table. A major benefit is that in the event of an economic downturn, you can hold your property and then sell or refinance once the market improves – no selling in a buyer’s market.

Want more info on multifamily investing? Go to investments.barrattassetmanagement.com and sign up for an account. Once there, under “offerings” you’ll find a free library with articles and videos featuring Ivan and his insider knowledge and insight, as well as a ton of info on BAM, its team, track record, and offerings.

About BAM Multifamily Growth & Income Fund II

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.

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The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.