Multifamily construction loans fund the building that is not there yet: a 5–20 unit garden walk-up, a small stacked flat, or a similar mid-size rental you will hold or sell at stabilization. The search term is national. The product that actually fits most private sponsors is not HUD 221(d)(4) and not a 2–4 unit house loan with extra doors.
Jaken Finance Group funds qualified investor construction at 8.99%–13.5% interest-only. Leverage is the lower of cost and 75% of as-completed value. Close targets 10–14 business days when plans, title, and the takeout story are already in the file. Stabilized rent exits toward DSCR at 5.75%–10.5% or a community-bank permanent loan.
If you already own a 5+ unit building, use multifamily bridge loans. If you are building single-family rentals in a pod, use build-to-rent programs. If the finished product is a $1 million-plus spec house, use luxury new construction. This page is the middle: small multifamily vertical without an agency construction desk.
Apply: new construction application · submit a scenario · (833) 264-7776
The box — 5–20 units, typically under $10 million, not HUD
| Item | This facility | Not this facility |
|---|---|---|
| Units | 5–20 | 2–4 (residential construction) or 80-unit agency |
| All-in | Usually under $10M | HUD / large agency construction |
| Collateral today | Dirt + plans, or a pad ready for vertical | An existing rent roll |
| Term | 12–18 months IO typical | 40-year HUD amortization |
| Takeout | DSCR, community bank, or sale | Ginnie Mae / HUD permanent |
HUD’s 221(d)(4) program exists for new and substantial rehab multifamily with a long federal process. Sponsors search “multifamily construction loans” and land on HUD explainers written for a different balance sheet. If you need HUD, call a HUD lender. If you need a private construction facility that can close on plans and a rent-comp set, stay here.
Two-to-four unit ground-up is a house construction file. Use spec / build-to-rent or ground-up construction. Permanent 5–10 and 10+ unit rental debt on existing buildings lives on 5–10 unit multifamily DSCR and 10+ unit multifamily DSCR.
Construction vs existing-asset bridge vs BTR
Sponsors blur three products because all three say “multifamily” in a meeting.
Multifamily construction (this page). No building, or only a foundation. Draws follow inspection. Rent is a projection until certificate of occupancy and lease-up.
Existing-asset multifamily bridge. The building is standing. You are buying it, recapitalizing it, or doing value-add. Underwriting starts with a T-12 and a rent roll. That is the 5+ unit bridge desk.
Build-to-rent. Purpose-built houses or townhomes held as rentals, often on scattered or clustered lots. The capital stack can look like construction, but the product and the takeout comps are single-family. Use the BTR pages.
If the frame is already up and the original lender froze draws, do not force a new construction application. Use mid-construction refinance.
How we size the construction stack
Vertical multifamily still obeys the same two caps as other investor construction:
- Cost. Land basis (or as-is if you already own it) plus hard cost, reasonable soft cost, contingency, and a reserve we can defend.
- Value. 75% of as-completed market value from comps that match unit mix, finish, and parking — not a pro forma cap rate you chose because it made the loan work.
The loan is the lower of those two. Interest-only on the drawn balance at 8.99%–13.5%. Contingency 10%–15% of hard cost. Draws: site/foundation → structure → MEP rough → drywall/finish → CO. We do not front-load more than a small share of hard cost before the foundation inspection.
Land that is still unentitled is not a multifamily construction file. Entitlement and streets belong on A&D loans and subdivision financing. Bring the recorded lot or the pad that is ready for this building.
Takeout — model the permanent payment before you pour
Construction interest-only is cheap relative to a 25- or 30-year amortizing takeout. Files break when the sponsor models carry and forgets the exit payment.
DSCR takeout. When the building is leased and NOI supports the payment, DSCR at 5.75%–10.5% can work on qualified files. Unit mix, parking, and whether the asset still reads as residential vs small commercial matter. Read the 5–10 and 10+ DSCR pages for the permanent box. Do not assume 85% purchase LTV on a brand-new 16-unit. Construction takeout often lands closer to 70%–75% of stabilized value.
Community bank. Some 8–16 unit buildings exit to a local bank on a trailing rent roll and a personal guarantee. That is a relationship and a credit box we do not control. We still want a written path, not “banks love this town.”
Sale. A sale to an operator at stabilization is an exit. A sale of a vacant shell is a different (and weaker) story.
Lease-up reserve is part of the construction file. A 12-unit building that delivers in November in a college town does not lease like a July delivery. Budget vacancy and concessions in the months after CO, not as a footnote.
Example: 12-unit garden walk-up
| Line | Amount |
|---|---|
| Entitled pad (already owned, as-is) | $420,000 |
| Hard cost | $1,860,000 |
| Soft cost (plans, permits, insurance, GC fee already in hard) | $210,000 |
| Contingency (12% hard) | $223,000 |
| Interest + lease-up reserve | $165,000 |
| All-in | ~$2.88M |
| As-completed value (unit comps, not a hoped cap rate) | $3.40M |
| 75% of as-completed | $2.55M |
| Lower of cost vs value cap | $2.55M binds |
The sponsor asked for 90% of all-in — about $2.59M — and thought they were inside a “construction LTC” slogan. The value cap binds first. The file that works brings cash for the gap or revises finish and unit mix until comps support the cost.
Interest-only during the build at a rate inside 8.99%–13.5%. Term 14 months plus a lease-up tail. Takeout modeled at 6.75% amortizing on $2.38M (70% of $3.40M) to test DSCR on a conservative rent roll: 12 × $1,450 less 6% vacancy, taxes, insurance, and 30% opex. If that DSCR is under 1.0, the construction loan is not the problem. The exit is.
This example is a garden walk-up. It is not a scattered BTR pod and not a HUD tower.
What moves pricing inside the band
- Unit mix and comps. Studios next to a hospital lease differently than three-bedrooms in a family grid. Comps must match.
- GC and schedule. A licensed GC who has delivered this product in this city. A 12-month schedule that ignores winter or inspections will slip.
- Parking, sprinklers, and accessibility. These are cost drivers, not surprises. Miss them and the contingency is gone before drywall.
- Sponsor liquidity. Lease-up and a slipped CO are cash events.
- Takeout letter or a modeled path we believe. Not a cap-rate screenshot.
Credit is reviewed. Approval rides on cost, as-completed value, GC, and exit — not on a W-2 story.
When we pass
- HUD-sized ambition with a private-lender timeline
- Unentitled acreage sold as a 16-unit construction loan
- No GC, or a GC who has never delivered multifamily
- Rent comps from a different product or a different side of the highway
- No lease-up reserve and no takeout path
- A request to ignore the 75% as-completed cap
- Owner-occupied or mixed owner-occupy. We finance investment property only
What “garden” and “stacked flat” change in the budget
A two-story garden walk-up with surface parking is a different building than a three-story stacked flat with a podium and an elevator. Sponsors blur them because both have twelve doors. Underwriters do not.
Garden walk-up. Wood frame, surface or tuck-under parking, often no elevator. Cost per door is usually lower. Comps are other gardens. Fire and accessibility rules still apply; they are just a shorter list.
Stacked flat / small podium. More structure, more wet stacks, often sprinklers on every floor, sometimes an elevator at a unit count you did not expect. Cost per door jumps. If your comps are gardens and your plans are a podium, the as-completed value will not follow the cost.
Say which product you are building in the first paragraph of the package. We will match comps to that product. We will not average a garden sale and a mid-rise listing to make a loan amount.
Parking, density, and the city rule that kills a unit
Cities trade units for parking. A 12-unit plan that needs 18 spaces on a pad that holds 11 is not a construction file yet. It is a redesign. Count spaces on the survey, not in the rendering. If the city will accept a fee in lieu of parking, put the fee in the budget. If they will not, cut a unit or buy the lot next door — and that purchase is a different conversation.
Density bonuses and ADU-style extra doors are local. We do not underwrite a bonus that is still a concept. Bring the approval.
Insurance during construction and at CO
Course-of-construction insurance is not the same binder you will need at certificate of occupancy. Garden multifamily liability and property quotes can move the takeout DSCR by hundreds of dollars a month. Get both quotes before you lock a rent roll in your model. A file that uses an SFR insurance number times twelve will fail when the real binder arrives.
Lease-up is part of construction, not a sequel
Certificate of occupancy is not stabilization. A 12-unit building that delivers empty has twelve chances to sit. The construction reserve should cover a real lease-up, not two weeks of ads.
Pre-leasing. In some markets you can take deposits before CO. In others you cannot. If you can, those deposits are evidence. If you cannot, do not write them into the model as if they were leases.
Concessions. A month free on a 12-month lease is an 8% haircut on that unit’s first-year rent. Twelve units doing that at once is a different NOI than the brochure.
Property management. A garden this size is often self-managed by the sponsor or a local PM who already runs a nearby asset. A PM who has never leased new construction will miss the first 60 days. Name the plan.
We will not treat “lease-up” as a vibe. We will treat it as months of interest and vacancy that have to be reserved.
Package to submit
- Entity docs, pad deed or contract, and survey
- Plans, specs, and a line-item budget
- GC contract or bid and a draw schedule
- Rent comps and a lease-up calendar
- Tax, insurance, and operating budget for takeout DSCR
- Written takeout path (DSCR, bank, or sale)
- If the job is already started: photos, remaining bid, current loan terms — and use the mid-build desk
Starting point across construction products: new construction loans for investors. Infill dirt before this building exists: infill lot development financing.
New construction application · Submit scenario · Get approved · (833) 264-7776
Multifamily construction examples are nationwide lending illustrations on investor real estate. Rates, terms, and conditions apply only to qualified borrowers and may change without notice. Jaken Finance Group does not finance owner-occupied housing.