Freddie Mac Student Housing Value-Add Financing

In college towns and major cities across the U.S., the student housing market is alive and well, but to stay competitive, investors need to make sure their properties are modern, livable, and comfortable. Sometimes, that requires a little bit of work.

So, if you're interested in purchasing or refinancing a student housing property in order to make some light repairs or renovations, the Freddie Mac Student Housing Value-Add Loan could be the perfect choice. Student Housing Value-Add Loans offer LTV allowances of up to 85%, are interest-only, and are non-recourse, making them an incredibly attractive option for developers looking to make their student housing properties more profitable. 

To learn more, check out Freddie Mac’s official Student Housing Value-Add Loan Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Student Housing V Loan program.

Sample Freddie Mac Terms for Student Housing Value-Add Loans in 2024

Size:  Varies based on LTV and DSCR requirements 

Use:  Acquisitions and refinances of eligible Student Housing properties requiring moderate upgrades of $10,000 to $25,000 per unit

Terms:  3 years with one 12-month extension (borrower's request), and another optional 12-month extension (based on Freddie Mac discretion) 

Interest Rates:  Floating-rate interest-only loan

Interest-Rate Caps:  Not required 

Maximum LTV: Up to 85%

Minimum DSCR:  1.20x 

Recourse:  Non-recourse with standard “bad boy” carve-outs

Eligible Borrowers:  Must have experience owning and operating similar Student Housing developments. Guarantors must have 1.5x the standard liquidity/net worth requirements.  

Eligible Properties: 

• Properties must have no more than 250 units or 625 beds

• Eligible properties are high-quality and only require light renovation

• REO (real-estate owned) properties in receivership or properties performing below market averages (especially those requiring improved management) are also eligible

• School must have at least 15,000 minimum enrollment

• Properties must be located within 2 miles of campus, with easy access to campus via walking or public transportation

Other Rehab Requirements: 

• Renovation must start within 90 days of origination and must be complete within 33 months

• Planned upgrades must be between $10,000 and $25,000 per unit or $4,000 to $10,000 a bed

• At least 25% and up to 50% of budget can be spent on unit interiors

Refinancing Test:  Not required

Assumability:  Not assumable 

Prepayment Penalty:  Loan can be paid off at any time with 1% penalty. No penalty if the loan is refinanced with Freddie Mac. 

Advantages:

• Budget can be increased up to 20% without approval

• Up to 75% of funds can be spent on exteriors

• Eligible mixed-use properties supported

• No refinancing test required

Disadvantages:

• Appraisal must include as-stabilized values

• Replacement reserves are generally required

• Loans are not assumable

• Additional rehabilitation escrow or completion guaranty required

• Application fee and good faith deposit also required