Non-Contiguous Properties and the Freddie Mac SBL Program
Unlike many kinds of multifamily loans, the Freddie Mac SBL program allows financing for non-contiguous properties– properties that are located at several different sites (i.e. “scattered sites”. However, to qualify, a “scattered sites” property must meet several important criteria. In order to maximize the chance of being approved for the Optigo Small Balance Loan program, borrowers should address all of these on the SBL Exception Form during their loan application/quote process. In some cases, Freddie Mac will be able to make a decision without detailed additional information, but this is generally not ideal. Some exceptions are allowed to the below criteria, but not many.
In addition to non-contagious properties, contiguous properties on different parcels should also generally fill out relevant property details on their SBL Exception Form. However, when it comes to contiguous parcels, Freddie Mac is generally somewhat flexible on the minimum number of units that must be in each building. For instance, if one out of three buildings on separate, but contiguous parcels had 3 or 4 units instead of 5, and the property meets all other criteria, there is a decent chance that Freddie Mac will approve the deal.
The most important thing that Freddie Mac wants to see is that all scattered or non-contigous properties are operated as one. This means one rent roll and one profit and loss (P&L) statement for the property.
Non-Contiguous and Separate Parcel Property Criteria:
- All buildings must have 5+ units
- Construction types for each building must be comparable
- Buildings all must be built within 10 years of each other
- All buildings must be within 1 mile of walking distance
- All properties must have the same signage and marketing
- All buildings/properties need to be owned under one SAE (single-asset entity)
- All buildings, structures, and parcels must be contained in one third-party report, which will list each address and will clearly indicate any differences between addresses
- All buildings must use the same maintenance team and building superintendent
- All properties must have expense ratios not varying by more than 5%
- Each unit type on scattered properties needs to have:
- Similar/comparable unit configurations (size, etc.)
- Similar interiors and appliances
- Reasonably similar rents for similar unit types