Apartment Renovation Loan Program
Montegra’s Apartment Renovation Loan Program provides real estate investors with the means to both purchase a multi-family residence and pay for any necessary renovations. It works by offering the borrower sufficient funding (when combined with a reasonable down payment) to cover the combined costs of purchasing a 12- to 50-unit building and of renovating and carrying the property until it is fully leased and producing enough income to qualify for a long-term loan from a traditional lender. This program can also help borrowers who wish to renovate a multi-family property that they already own by offering the necessary funds to pay off the original mortgage as well as additional reserve funds to cover the renovation costs.
How Our Apartment Renovation Loan Program Works
- Montegra works with the borrower to compute the total costs of buying the building, performing all the renovations, and carrying the building (i.e., paying interest and taxes) until the building is refinanced.
- Montegra obtains an appraisal of the building based on its “completed and fully leased value.” This value assumes rental increases (to market value) and an appropriate occupancy level.
- Montegra commits to lending up to 65% of the property’s “completed and fully leased value” with the borrower making a cash investment at closing that equals 25% to 30% (as determined on a case-by-case basis) of the total cost of purchasing, renovating, and carrying until the property has stabilized and can be refinanced.
- Montegra funds the balance of the purchase price at closing and reserves the necessary funds for renovation and carrying costs. Funds for renovation are dispersed through a simple draw procedure. Loan payments due to Montegra are also reserved and paid out monthly.
- Montegra charges interest rates ranging between 10% and 10.5% (as determined on a case-by-case basis), which are payable monthly in interest-only payments out of an interest reserve. The typical loan length is 12 months to allow the borrower adequate time to renovate, stabilize, and refinance the property.
- The borrower refinances with a conventional lender at a lower rate.
As a hard money lender, Montegra has more flexibility in our underwriting process than banks and other traditional lenders do, allowing us to fund loans that they cannot. For more information, call us to learn more at 303-377-4181.