High vacancy can make refinancing a multifamily property more difficult because fewer occupied units may mean lower rental income. A multifamily refinance loan is generally assessed using the property’s financial performance, including NOI, DSCR and asset value. If a building has numerous vacant units, the income available to cover debt payments may be lower than expected. Investors should understand how current occupancy affects their financing position before submitting an application.
The first step is to measure the financial impact of vacancy. Review the rent roll to identify occupied and vacant units, compare current rents with lease agreements and examine rent collection records. Then calculate effective gross income after accounting for vacancy and credit losses. Deduct operating expenses to determine NOI. For example, a property may have substantial potential rental income, but vacant units can reduce actual revenue while taxes, insurance and maintenance continue. The resulting NOI may therefore be weaker than a projection based on full occupancy.
Lenders may also consider whether the vacancy is temporary or reflects a more persistent problem. Units awaiting minor repairs, recently vacated apartments and a building experiencing weak rental demand present different operating situations. Investors should document the reasons for vacancies and provide realistic plans for restoring occupancy. Improvements to unit condition, better management of tenant turnover and market-appropriate rental pricing may help strengthen performance over time. However, lenders may not give full credit to projected rent increases or future occupancy improvements when calculating current qualifying income.
InstaLend’s published multifamily term loan parameters identify 85% or higher occupancy as preferred, although final eligibility depends on the property’s complete financial profile and underwriting. If substantial vacancies or major renovation work are preventing the building from demonstrating stable income, investors may need to improve operations before pursuing long-term financing or consider whether bridge financing fits the property’s current stage. Before applying, calculate NOI using verified figures, assess DSCR and compare the property’s estimated value with its existing debt. A clear understanding of these factors can help investors determine whether refinancing is realistic now or whether additional stabilisation is needed first.