Loans for student housing

The short version

Property	First call	Also price
Stabilized, purpose-built, near a large campus	Fannie Mae, Freddie Mac	Life company at low leverage
Conventional apartments with many student renters	Agency conventional, bank	Agency student terms if over the student share
New, leasing up for its first academic year	Bridge, debt fund	Construction loan extension
Ground-up development	Construction loan	Preferred equity or mezzanine in the stack
On university land	Leasehold financing
Large portfolio	SASB, agency credit facility

Programs ranked for a stabilized student property

Rank	Program	Wins when	Loses when
1	Fannie Mae student housing	Near-campus, large enrollment, stable pre-leasing	Far from campus or a small school
2	Freddie Mac student housing	Larger loans, 7-year and longer fixed terms	Below the minimum loan size
3	Life company	Top-tier universities, low leverage	Most secondary schools
4	Bridge and debt fund	Lease-up, renovation, a weak leasing year	Floating rate, extension tests
5	Bank	Smaller buildings near campus, local sponsors	Recourse

What student housing underwriters focus on

• Pre-leasing velocity. How much of next year’s beds are leased by each month of the leasing season, compared with prior years and competing properties. A slow leasing season shows up before the trailing income does.
• By-the-bed or by-the-unit leasing. Bed leases spread rent across roommates but raise turnover and bad debt; lenders underwrite each.
• Enrollment trends. Total and full-time enrollment at the university, and whether it is growing or shrinking.
• Distance and transit. Walkable to campus or on a university transit line.
• University supply. New on-campus beds or a change in the school’s live-on requirement can empty off-campus beds quickly.
• Turnover and furniture costs. Annual turn of most units, furniture replacement and higher repairs. Lenders underwrite a higher reserve and expense load than for conventional apartments.
• Lease-year timing. Most leases start on one date. A loan that closes mid-year is underwritten on the current lease year and next year’s pre-leasing.

Sizing example (illustration)

An illustration, not a quote. A 220-bed property near a large campus, $850 per bed per month: $2,244,000 gross potential rent, $2,086,920 collected at 93% economic occupancy. NOI is $1,043,500 after an assumed 50% expense ratio, valued at $16,700,000 (a 6.25% cap rate). Both agencies at an illustrative 6.30% on a 30-year schedule:

Test	Fannie Mae	Freddie Mac
Program limits used	75% max LTV, 1.30x fixed; 1.05x variable (subject to fixed-rate test)	80% LTV at 1.30x (7-year+); 75% for 5 to under 7 years
LTV	$12,525,000	$13,360,000
Debt service the NOI supports	$1,043,500 / 1.30 = $802,700	$802,700
Loan constant	7.43%	7.43%
DSCR test	$10,807,000	$10,807,000
Loan	$10,807,000 (65% LTV)	$10,807,000 (65% LTV)

The leverage caps differ, but coverage binds both loans at the same amount. That is common: on student housing the 1.30x coverage test, not the LTV, sets the loan. The choice between agencies then comes down to rate, prepayment and the lender’s view of the school. Run your own numbers in the DSCR calculator.

From construction to agency

Most purpose-built student housing goes through three loans: a construction loan (often with preferred equity or mezzanine in the stack), a bridge or extension through the first leasing seasons, and an agency loan once the property shows a full stabilized year. Plan the takeout terms before you build; see bridge to agency takeout.

Programs to avoid

• Freddie Mac Conventional Small. Excludes student housing.
• Hard money as a hold loan. It bridges a leasing season at most; plan the agency or bank takeout first.
• Permanent fixed-rate debt during lease-up. It sizes on weak first-year income and locks in a small loan with heavy prepayment.