QandAs: Loans

What is an Apartment Loan?

Answer:
Most people are familiar with home loans, since

most homeowners needed to borrow money in order to purchase their home. Another type of real estate loan that is not as common is an apartment loan. This is a loan that is used by real estate investors or property management firms to buy units in an apartment complex.

When someone uses an apartment loan to buy apartment units or condos, he or she typically rents out as many units as possible, using the rent to both pay back the loan and make money from the rental. The owner hopes that the value of the units will increase so that he or she is able to make a profit from the investment as well as collecting the monthly rent.

Apartment loans are often confused with mortgages, but the two have several large differences. Mortgages are used to pay for both the home and the land upon which the home is built. Apartment loans are strictly for the living units. Someone who owns several units in a building does not own the land, but simply the units. These units can then be rented out to tenants.