What Properties Are Eligible for HUD 223(f) Financing?
HUD 223(f) loans offer incredibly generous terms-- including 35-year, fully amortizing , fixed-rate financing, and nearly unbeatable leverage . But what kinds of properties can be financed with a HUD 223(f) loan ? In general, properties must have 5+ units, and each unit must have a co
Eligible Properties for HUD 223(f) Loans
HUD 223(f) loans offer incredibly generous terms-- including 35-year, fully amortizing, fixed-rate financing, and nearly unbeatable leverage. Property types that can be financed with a HUD 223(f) loan include student housing, market-rate, affordable properties, and others.
HUD 223(f) Loans Permit Nearly All Property Types
In general, to be eligible for HUD 223(f) financing, a property:
Must have 5+ residential units
Must have complete kitchens and bathrooms for each unit
Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
What types of properties are eligible for HUD 223(f) financing?
Eligible Properties for HUD 223(f) Loans: HUD 223(f) Loans Permit Nearly All Property Types
In general, to be eligible for HUD 223(f) financing, a property:
- Must have 5+ residential units
- Must have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
What are the requirements for a property to qualify for HUD 223(f) financing?
In order to be eligible for HUD 223(f) financing, a property must:
- Have 5+ residential units
- Have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
What types of improvements are eligible for HUD 223(f) financing?
HUD 223(f) Loans permit nearly all property types. Repairs, deferred maintenance, and capital improvements for up to the greater of 15% of the property value, $6,500 per unit (adjusted for high-cost areas), or 20% of the mortgage proceeds can be included in the loan amount, subject to leverage and DSCR limitations. However, these repairs cannot exceed $15,000 per unit (also adjusted for high-cost areas), and cannot replace more than 50% of a major building system (i.e. plumbing, electrical, building structure).
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What is the maximum loan amount for HUD 223(f) financing?
The maximum loan amount for HUD 223(f) financing is technically unlimited, however, loans above a certain size may have stricter requirements. For example, for HUD 223(f) loans above $75 million, requirements include:
- Affordable and Subsidized Properties: Maximum LTV of 80% and a minimum DSCR of 1.25x
- Market-Rate Properties: Maximum LTV of 75% and a minimum DSCR of 1.30x
Plus, if a loan is more than $100 million, HUD may decide to impose even more restrictive LTV and DSCR requirements in order to reduce their risk. Regardless, the overall size of a HUD 223(f) loan cannot go beyond a specific per-unit limit set by HUD (and adjusted by project location).