Dana on June 16, 2020


current lender landscape

A few changes to lender requirements set forth for multifamily investing have come into play over the past few weeks.  It is unknown if these changes hold true in the short or long term, but here are some ways to navigate through them.


Apartments in urban areas are commonly home to workers employed in industries that are most dependent on consumer spending such as retail, travel, entertainment, food, recreation, and other similar services.   

Once COVID entered the scene, occupancy requirements have increased slightly – something to keep in mind when looking into your next investment as it may affect your renovation program.  

If you’re looking to update your interiors, you could consider partaking in occupied renovations depending on what you would like to remodel or update.

This is the perfect time to complete any exterior renovations on your to-do list.  A fresh coat of paint on the buildings, resurfacing the swimming pool, and/or adding an outdoor kitchen do not affect occupancy rates, and in turn may increase your occupancy once potential renters see the changes!


Gone are the days of one scope of work per project.  We have found the need to create scopes of work that hybrid various tiers of renovation.  This ultimately allows for us to get to a lower cost per door, fitting into the proposed, lender-approved budget.  

Creativity is key.  A walk of the units may show that full cabinet replacement is not necessary to receive the anticipated rent bump, but simply new doors and hardware – or even something simpler such as painting the doors depending on the scope requirements.  It is very important when value-engineering the scope to not sacrifice design.

Keep in mind uniformity when creating multiple scopes.  A perfect example would be a project where 60% of the units need new cabinets and 40% just need new cabinet doors.  Be sure to install the same cabinet doors in ALL units. 


computer with statistics

Across the board there have been reports of more conservative underwriting thresholds by the lenders.  

We have seen, in multiple cases, where the lender is more specific when it comes to allowances.  In the past, there would be a line item for “allowances” dog earring funds for known unknowns. Now, the lenders are requiring more detail – they want to know what the known unknowns are.

This should not pose concern, just more descriptions as to what the extra funds may be used for.  


Contingencies, defined as the “unknown” unknown, are now becoming carried within the construction contract, earmarking those funds in advance.  By doing so, it protects the lender’s overall investment.  Adding this line item to the construction contract would require a conversation with the general contractor and a tweak to the contract template.  

It is not known whether these changes hold true for months or years to come, so it is important to stay abreast of financial updates!


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