Small multifamily loans: providing sustainable and affordable financing solution


The lack of affordable housing has reached crisis level in the nation’s cities and suburbs.

The squeeze has tightened across housing segments steadily for years. Between 2005 and 2017, the stock of single-family homes remained essentially flat, resulting in unattainable homeownership for many. Though expected wage increases and moderating home prices should offset some of this higher homeownership cost, the U.S. credit card debt being at an all-time high and the student debt load topping $1.5 trillion means that the down payment needed to purchase a home is simply not possible for many Americans.

With renter demand continuing unabated and many Americans being priced out of owning a home, the single-family market is feeling the pressure of higher interest rates, a lack of affordable single-family supply, and historically high debt loads. According to Harvard researchers, from 2001 to 2016 renters’ median housing costs rose by 11% while their income actually fell by 2%. Even though rental units grew 23% during that span, the rental market has also remained constrained and seen prices soar.

About 108 million Americans, equivalent to approximately a third of the country, are renters. And of this 108 million, 23 million live in a low-income household that pays more than half of its income for rent, according to the Center on Budget and Policy Priorities.

Although solutions to the wide-scale problem are elusive, borrowing programs initiated by the government-sponsored enterprises, Fannie Mae and Freddie Mac, have eased conditions and could even prove game-changing in a pivotal market segment: small multifamily residential properties. Expanding incentives to borrow, the programs have lately caught fire with investors because they increase the affordability of this category of housing for owners and renters alike.

Gary Ghiselli is a prime example of an owner who has taken advantage of these programs. Earlier this year Ghiselli, a surgeon based in Denver, Colorado, looked to refinance a 24-unit property he owned with a low-fixed-rate loan that would shield him from market volatility. A real estate finance company steered him to Fannie Mae’s Multifamily Small Loan program, which gave him the protection he desired—and more—and in less than 45 days. During a rally in U.S. Treasury rates, he locked in a 4.09% fixed-rate loan for 12 years, a vast improvement over the variable-rate, shorter-term bank loan he had previously taken to acquire the property. What’s more, the new loan was non-recourse and interest-only, leaving him with extra cash to pay for upkeep, improvements, and to further invest in workforce housing properties throughout the area.

“Since the rates and fees were low, I was able to refinance the property while keeping rents affordable for the families who live here,” Ghiselli said.

Ghiselli achieved all of this with limited paperwork, low fees and an exceptionally streamlined process – the perfect solution for a property owner whose investments are not the primary source of income.

The small loan financing option does not only benefit the casual investor; WCI Partners, a Harrisburg, Pennsylvania-based real estate development company is leveraging these programs to realize their business goal and mission of urban revitalization. Experts in shaping communities in tertiary markets like Harrisburg, the WCI Partners team saw an opportunity to refinance three of their properties utilizing Fannie Mae’s small multifamily loan program. They received a 10-year, non-recourse, $8 million loan, with a three-year interest only option, and 30-year amortization. Because WCI Partners was able to quickly and painlessly refinance these three properties, they were also able to better focus on their mission to “create residential and commercial projects that are both economically and socially valuable for their surrounding communities.”


Please enter your comment!
Please enter your name here