Banks Tighten Multifamily Lending

Barry Saywitz

Banks are showing the first signs of concern about the Southern California multifamily market—which has been the darling of this cycle. With prices hitting record numbers, cap rates continuing to compress and rents increasing at a rapid pace, bank lenders are beginning to pull back on multifamily lending. While there is still demand for the right deals, multifamily borrowers may start to find higher leverage requirements and more scrutiny of the deal—especially as compared to the last few years.

“The banks that I have talked to are getting a little nervous, and they are stiffening their underwriting,” Barry Saywitz, president of the Saywitz Co., tells GlobeSt.com. “It isn’t that they won’t make loans on apartment buildings, but they are making less risky loans for fewer dollars. That means that the buyer has to come up with more money. If you are an investor that has the money, that is no problem. If you are the guy that doesn’t have as much money and you need leverage, then you are going to have to buy a smaller property or come up with more money.”