Commercial Apartment Financing - From Bridge Loan to FHA Loan

[Daniel Yoo]

Hi BP world,

I need your expertise on this scenario. I will be purchasing and rehabbing a commercial apartment property using a 2 year Bridge Loan.

My exit is to stabilize the property and refi out into a FHA loan. I've been told from others that it's difficult to do to it's impossible to do. So, I need some expert clarification on this. Thanks!

[Darryl Dahlen]

You can refi out of a bridge loan into a HUD 223(f) loan providing you qualify.
HUD loans are ideal for those who are going to hold onto the property on a long term basis as they are expensive to obtain and have a hefty pre-payment penalty (PPP).
Here are some facts for you to consider:
-Most HUD lenders don't entertain loans under 2M, but I've gotten a term sheet on a 1.5M project.
-The property must be stabilized at 90% occupancy for 3 consecutive months to be considered.
-HUD likes you to have prior experience owning multi-family properties.
-No cash-out allowed on properties newer than 3 years and the borrower must have held the current note for 2 years (this is a new rule).
- Typically, the most expensive component is the replacement reserve, but there are also HUD inspection fees, a phase 1, an application fee of 1/3 of 1% of the loan amount, MIP if over 80%, and audit fee, etc.
- HUD 223(f) loans go up to 85% LTV on a 35 year term
-Typical PPP is 10 years. This is normally broken down into a 2 year lockout followd by a step-down PPP.
-Loans are assumable and non-recourse.

That covers most of the basics, but if you have a specific question please ask.