Eligible Properties:

• 40% or more units must be leased to undergraduate or graduate students
• Must not be located on University-owned land (with the exception of Dedicated Student Housing Properties)

Eligible Borrowers: Must typically be a Single Purpose Entity (SPE), though some lenders allow general or limited partnerships, limited liability companies, corporations, trusts, or individuals.

Timing: Loans typically close 45-60 days after initial application

Dedicated Student Housing Properties:

• Must have at least 80% of the units leased to graduate or undergraduate students
• Need to be located near a college/university campus with at least 10,000 students enrolled, and at least 50% of those students enrolled full-time
• Have at least 80% of leases with 12-month terms (guaranteed by parents), or leased by student tenants with the financial capability to pay their lease
• Needs to be within 2 miles of campus or a college/university transportation line
• Must be operated for one school year and be in its second year of operations
• Can be located on university-owned land (provided key principal has at least 5 years of experience and "operates at least one other Dedicated Student Housing Property" on college or university-owned land)

Advantages:

• Very competitive interest rates
• Up to 75% LTV
• Most loans are non-recourse
• Interest-only loans are permitted in some situations
• Supplemental loans allowed after 12 months
• Loan underwriting may be based on a per bedroom rate, leading to a higher loan amount than for a comparable (non-student housing) multifamily property
• 30-90 day rate locks available after commitment, with 6-month extended rate locks also available before closing (1 year-rate locks available in some cases)
• Loans are fully assumable (with lender approval)

Disadvantages:

• Requires third-party reports, including an Appraisal, Phase I Environmental Assessment, and Physical Needs Assessment. May also include reports such as Flood Inspections, Property Surveys, and Site Inspections.
• Typical lender closing costs are about $12,500 (including third-party reports)
• Also typically requires about $7,500- $12,500 in legal costs
• Replacement reserves of $250/unit per year are required
• Student Housing Properties require at least 40% student occupancy (may be up to 80% undergraduate-only occupancy for some lenders), and often also require a minimum overall tenant occupancy of 90%
• Owner/operators must be U.S. citizens, with liquid assets that can cover at least 6 months of mortgage payments after closing
• Owner/operators must have a proven track record in the student housing industry
• Student tenants must typically sign 12-month leases guaranteed by parents or must be currently employed and have good credit
• Typically requires a 2% rate lock deposit paid at rate lock (refunded after Fannie Mae purchases the loan, usually about 30 days post-closing)
In this article:
1. Multifamily Loans for Student Housing Developments insured by Fannie Mae
2. Sample Fannie Mae Student Housing Loan Terms
3. Get Financing