Acquiring an under-managed 5 to 100+ unit apartment building with below-market rents or 65% physical occupancy is one of the highest-margin strategies in commercial real estate. However, Fannie Mae, Freddie Mac, HUD, and conventional commercial banks generally refuse to finance multifamily properties with less than 85% to 90% physical occupancy for 90 consecutive days or historical trailing-12 (T-12) cash flow below a 1.25x DSCR. Multifamily bridge loans bridge that 12 to 36 month value-add execution window.
2026 Multifamily Bridge Underwriting Parameters (5+ Units)
| Underwriting Parameter | Small Multifamily ($250K to $3M) | Middle-Market Multifamily ($3M to $25M+) |
|---|---|---|
| Maximum Purchase LTV | 75% to 80% of As-Is Purchase Price | 70% to 75% of As-Is Purchase Price |
| CapEx / Rehab Funding | Up to 100% of CapEx (Capped at 80% LTC / 70% ARV) | Up to 100% of CapEx (Capped at 75% to 80% LTC) |
| Interest Rate (2026) | 9.25% to 11.25% Fixed Interest-Only | SOFR + 325 to 475 bps (Floating with Rate Cap) |
| Term & Extensions | 12 to 24 Months + one 6-month extension | 24 to 36 Months + two 6-month extensions (3+1+1) |
| Recourse Structure | Full Sponsor Recourse (Carve-out on larger tiers) | Non-Recourse with Standard Bad-Boy & Completion Guaranty |
| Exit Underwriting Test | 1.20x to 1.25x Stabilized DSCR | 1.25x DSCR & 9.5% to 10.5% Stabilized Debt Yield |
How Interest Reserves and CapEx Holdbacks Work in Multifamily Bridge Debt
When you take offline 30% of an apartment building's units to renovate kitchens, baths, and mechanical systems, in-place property cash flow temporarily drops below monthly interest-only debt service. Sophisticated multifamily bridge lenders solve this with two escrow buckets built into the total loan commitment:
- Capital Expenditure (CapEx) Holdback: Funds exterior improvements (roofs, parking lots, signage) and interior unit turns ($8,000 to $20,000 per door) via monthly draw inspections.
- Interest & Carry Reserve: A dedicated lender-held reserve equal to 3 to 9 months of projected interest shortfall during renovation and lease-up, drawn automatically each month until the rent roll reaches break-even occupancy.
Stress-test your stabilized apartment rent roll, operating expense ratio, and 1.25x takeout coverage right now in our Commercial Bridge-to-DSCR Exit Calculator, or compare multifamily lenders like Lima One Capital and CoreVest Finance.