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Single-family rentals (SFRs) are a wonderful investment opportunity, especially at a time when occupancy and rental rates are exceptionally high. Investors can make the most of their investment properties by choosing the best financing option. For many, this means an SFR portfolio loan. Learn more about these loans and when they’re a good fit.
What is an SFR portfolio loan?
An SFR portfolio loan is a way to finance multiple investment properties (i.e., a “portfolio”) with one loan rather than many. An SFR portfolio loan may facilitate purchases, debt consolidation, or cash-out transactions on a portfolio of rental properties but with the simplicity of only a single closing, a single set of loan documents, and a single payment. An SFR portfolio loan is an excellent option for a real estate investor with a portfolio of many residential properties; rather than juggling many individual mortgages, the owner/investor can finance their entire portfolio with one loan.
When does an SFR portfolio loan make sense?
An SFR portfolio loan is a strategic option to consider if you have three or more investment properties and want to:
Consolidate your debt.
Many investors use a variety of loans to finance their SFR properties. As they acquire new properties or take on new projects, they may get a new loan from their bank, credit union, or private lender. Managing this variety of loans—each with its own terms and payments—can quickly become convoluted. A portfolio loan allows you to remove the complexity and consolidate your debt under one umbrella.
Finance a new property purchase.
Real estate investors often start by obtaining loans from their bank or credit union. However, as owners grow their portfolios, they may reach a lending limit with these financial institutions. Don’t let this limitation stop you from acquiring new properties. If you have a portfolio of SFR properties and want to purchase a new property, an SFR portfolio loan can help you finance your new purchase and roll your existing debt into your new portfolio loan. You can also take advantage of an SFR Portfolio Bridge Loan for short-term funding for acquisitions as well as renovations or lease-ups.
Refinance to adjust your rate or term.
You may want to refinance with an SFR portfolio loan to take advantage of lower interest rates. Refinancing also gives you the option to reset the term of your loan to either pay off the mortgage sooner or to lower your monthly payment by lengthening the term. You may qualify for an SFR Portfolio Permanent Loan if your portfolio is at least 90% occupied.
Use your equity through a cash-out refinance.
You can also use an SFR portfolio loan for a cash-out refinance. This can be helpful when you need access to capital for a new purchase, renovation project, or other investment opportunities. VCREF’s SFR portfolio loans have no dollar amount limits on cash-out refinance transactions, letting you take full advantage of your portfolio’s equity.
How do I qualify for an SFR portfolio loan?
One of the best things about portfolio loans is that they are flexible, so you can work with your commercial real estate lender to agree on terms that work well with your goals and satisfy the lender’s requirements.
Different lenders will have different requirements for qualifying for a portfolio loan. At VCREF, we have the following requirements for our SFR Portfolio Permanent Loan:
- Net worth of at least 25% of the loan amount
- Liquid net worth of at least 5%
- Minimum of three properties in the portfolio
- At least 90% occupancy by loan closing
- Lease-ready condition for unleased properties
We also offer an SFR Portfolio Bridge Loan for short-term financing. To qualify for this loan, borrowers must meet the following requirements:
- Net worth of at least 25% of the loan amount
- Liquid net worth of at least 10%
- Minimum of three properties in the portfolio
- At least 90% occupancy by loan maturity
In some cases, the most helpful financial product is an SFR Portfolio Guidance Line, which provides preapproval for bridge funding up to $15 million. Borrowers can draw on this flexible alternative to a line of credit as needed over the course of the term.
Our lending parameters are very inclusive. For example, we extend our SFR portfolio loans to other property types besides SFRs, including small multifamily properties, townhouses, condos, and others. We also lend to both U.S. citizens and foreign nationals.
Learn more about rental property financing.
An SFR portfolio loan is a great option for owners and investors with multiple rental properties. If you’re weighing your financing options, take a moment to learn more in our guide, Financing Single-Family Rental Portfolios Through a Private Commercial Real Estate Lender vs. a Bank
