SFR Portfolio Loan

SFR Portfolio Loan at a Glance

If your real estate portfolio includes residential rental properties, you may be interested in an SFR Portfolio Loan from Verus Commercial Real Estate Finance (VCREF).

VCREF’s SFR Portfolio Loan provides long-term fixed-rate financing, helping landlords leverage their investment properties’ equity or consolidate debt.

Chapter 1

Why Consider VCREF for Your SFR Portfolio Loan?

VCREF’s SFR Portfolio Loan program is exceptionally flexible, streamlined, and competitive.

Flexible

VCREF’s SFR Portfolio Loan is tailored to your needs. After submitting an application, you will be paired with a VCREF originator who will help structure a loan that achieves your goals, even if your situation is “unique” or your portfolio is “non-traditional.” We offer a wide range of loan sizes and term lengths. Additionally, we have a variety of loan features available, including interest-only (IO) payments, loan assumability, and non-recourse options.

Streamlined

VCREF keeps paperwork simple and offers a fast response time so you can enjoy efficiency and convenience throughout the application process. We also aren’t restricted by geography: VCREF lends in all 50 states and the District of Columbia.

Competitive

VCREF offers competitive rates to our borrowers and seeks to keep closing costs low. For example, we can reduce closing costs in some cases by using hybrid appraisals, which tend to be more efficient and affordable than traditional appraisals.

Chapter 2

SFR Portfolio Loan Parameters

VCREF's Basic Loan Parameters Include: 

  • The portfolio consists of at least three properties.
  • Eligible property types:
    • Single-family homes
    • 2-4 unit properties
    • Warrantable condominiums
    • Townhomes
    • Planned unit developments
    • 5-20 unit multifamily properties
    • Modular homes
  • Borrower demonstrates a combined net worth of at least 25 percent of the loan amount.
  • Properties are at least 95% occupied by loan closing.
  • Any properties not leased are in lease-ready condition.

Chapter 3

SFR Portfolio Loan Options

Our SFR Portfolio Loan is designed to fit a variety of situations. We can work with borrowers to offer the following options:

  • Rate: Fixed rates starting at 3.99%
  • Term: 5, 7, and 10 year options
  • Purpose: Purchase, rate/term refinance, and cash-out refinance
  • Loan Size: $500,000-$25,000,000 (VCREF will consider larger loans by exception)
  • LTV: Up to 75% LTV
  • Recourse: Full and non-recourse options available
  • Payments: 30-year amortizing payments or interest only (“IO”)
  • Assumability: Assumability options available
  • Substitution: Property substitution options available
  • Citizenship: U.S. Citizens and foreign nationals encouraged to apply

Chapter 4

Getting a Loan from VCREF: Our Process Step by Step

Obtaining an SFR Portfolio Loan from VCREF involves the following steps:

  1. Submit an inquiry and complete our property information workbook. Information required includes your opinion of property value, current lease information, taxes, etc. 
  2. Review loan structure options and sign the VCREF term sheet: A VCREF Originator will review the loan options available and when one is chosen, will have a term sheet generated for your review and signature. 
  3. Underwriting: Our underwriting process includes:
    1. Appraisals: Order and review of appraisals
    2. Property Document Review: Leases, insurance documents, taxes, property management, and other documents related to the property
    3. Borrower Review: FICO, experience, financials, and other
  4. Legal & Title Review: Our team manages legal requirements including title searches, and has the flexibility to use your preferred agent.
  5. Loan Approval: After our reviews are satisfied, we will schedule the closing and will generally lock your rate the week of closing.
  6. Loan Closing: Your loan is closed!

Chapter 5

A Snapshot of the SFR Industry

The SFR industry is flourishing, and it’s no wonder since these properties offer strong investment potential while serving singles, couples, and families across the nation.

Rents are up across the board, but SFR rents, in particular, have seen a considerable increase over the last year. This is due in part to shifts in lifestyles and work models that have prompted many people to migrate away from densely populated cities to more residential areas.

Occupancy rates in 2021 have been extremely high, hitting an unprecedented 97 percent in July, according to Bloomberg. Rental property owners can benefit from this high demand and strong potential for consistently full occupancy.

SFR properties are also experiencing strong appreciation. Housing in all categories is projected to increase 13.6 percent over the next year, according to housing data from Zillow.

Overall, SFRs are a great commercial real estate investment opportunity—especially when you find the right solution for rental property portfolio financing that offers the flexibility and terms you need. VCREF’s SFR Portfolio Loan is the ideal financial product for many rental property investors.

Chapter 6

Frequently Asked Questions

Below, we answer some FAQs we hear from new borrowers, experienced brokers, and everyone in between.

I’m a foreign national. Can I apply for an SFR Portfolio Loan?
Yes.

Where does VCREF lend?
VCREF is a nationwide lender that lends in all 50 states and Washington, D.C. We use an easy online process for lending that you can complete from anywhere, so there’s no need for in-person meetings.

My rental property isn’t actually an SFR. Am I eligible for an SFR loan?
VCREF offers an exceptional level of flexibility. Even though this is an SFR loan, we consider properties outside the standard SFR, including townhomes, student housing, community housing, and more. Talk to us about your property types to confirm whether the SFR Portfolio Loan is an option for you.

Will VCREF lend on condos?
Yes, SFR loans may include warrantable condos. VCREF will even consider lending on non-warrantable condos on an exception basis.

Do I need a full appraisal?
You may be used to the extended time and costs involved in obtaining full or traditional appraisals for your properties. VCREF has options for hybrid appraisals, which can speed up the process to close and save you money.

How do I know if I’m the right size of investor to work with VCREF?
Commercial real estate investors come in all shapes and sizes. VCREF lends across a wide range of investors and loan sizes, so whether you need a $500,000 loan, a $20 million loan, or anything in between, VCREF has you covered.

I’m investing in a property that needs to be renovated. Does that pose a problem?
Properties that need minimal repairs (typically up to $3,000) are allowed on an exception basis. If your properties require more substantial renovations, you should consider a VCREF Bridge Loan instead of the SFR Portfolio Loan.

What other types of loans does VCREF offer?
VCREF offers several loan options for commercial real estate investors. Aside from the SFR Portfolio Loan, we offer:

VCREF is open to a variety of loan structures and property types, so don’t hesitate to ask about your specific situation, and we’ll recommend the right financial product for you.

Does VCREF have a bridge program for SFR transactions?
Yes, SFR investors can utilize VCREF’s bridge program to assist with transitions in their rental portfolio.

Is there a prepayment penalty?
VCREF offers several prepayment structures depending on the sponsor’s business plan. The general structures include yield spread maintenance and declining prepayment penalty percentages.

What is the max LTV that VCREF lends to?
VCREF lends up to a 75 percent loan-to-value.

Are your rates competitive?
VCREF’s SFR Portfolio Loan rates start at 3.99 percent and compete with the largest SFR portfolio lenders in the market. Rates are based on a variety of factors, including LTV, deal size, debt service coverage ratio (DSCR), property characteristics, term, and amortization type. Contact VCREF to learn more.

What is VCREF’s credit score requirement?
We require a minimum FICO score of 620.

Is VCREF’s loan nonrecourse?
Many borrowers are interested in nonrecourse loans to protect their personal assets. VCREF offers nonrecourse loans to our borrowers, subject to standard “bad boy” carve-outs.

How fast can VCREF close?
As few as 45 days.

What amortization options does VCREF offer?
VCREF offers both 30-year amortizing and interest-only options.

What is the minimum DSCR?
On amortizing loans, we require properties to have a DSCR of at least 1.15. For interest-only loans, properties must have a DSCR of at least 1.20.

Do the properties need to be leased prior to closing?
Fewer than 5% of units are allowed to be vacant prior to closing an SFR Portfolio Loan. If you need time to lease-up, a Short-Term Bridge Loan is a good option. Once leased, you may then refinance to an SFR Portfolio Loan.

Does VCREF offer cash-out refinance?
Yes, when you want to refinance to take advantage of your equity in a property, VCREF offers a cash-out refinance option.

Does VCREF lend to business entities?
Yes. Whether you’re an individual or operating under a business entity such as an LLC, you can apply for a loan with VCREF.

Chapter 7

Glossary

You may encounter some of these real estate terms as you read about SFR Portfolio Loans or discuss this topic with a lender:

CapEx — Capital expenditures (CapEx) are funds allocated towards maintaining or enhancing rental properties.

Cap Rate — Capitalization rate, or “cap” rate, is calculated by dividing a property’s NOI by its property asset value. This ratio projects an investment property’s expected rate of return.

Debt Yield — Debt yield is a risk metric that divides a property's net operating income (see definition below) by the total loan amount to show an investor how long it would take to recoup their investment if the property owner defaults on their loan.

DSCR — A property’s debt service coverage ratio (DSCR) is the ratio of income the property produces to its debt obligations. Profitable properties have a DSCR above 1.

LTC — Loan-to-cost (LTC) is the ratio of a loan amount to the cost of the project. (That could be either construction cost or purchase price.) Generally, the lower the LTC, the lower the risk for lenders.

LTV — Loan-to-value (LTV) is the ratio of ​​a loan to the value of the property. A property’s value could be the total appraised value of an existing property or the expected market value of a project. There are a few different ways to calculate a property’s value, including:

As Is —Sometimes LTV is calculated according to a property’s current value without taking into account any plans for repairs or renovations.
 
As Renovated  — In cases where a property is set to be repaired or renovated, the As Renovated Value (ARV) is relevant.
 
As Stabilized – Another way to calculate value is according to the projected value after the rental property reaches its expected occupancy rate and operating expenses. This is generally used for multifamily properties.
 

NOI — NOI stands for net operating income. This is a property's gross operating income after subtracting operating expenses. In other words, it reveals an investment property’s revenue potential.

Prepayment Penalty — A prepayment penalty is a fee some lenders charge when a borrower pays off all or part of their mortgage ahead of schedule.

Property Seasoning — Seasoning refers to the duration of time a person has owned a property or has held an active loan on the property.

Renovation Ratio — The Renovation Ratio (RR) is calculated as Renovation Costs / As is Property Value and used to gauge the extent of planned renovations on a property. Generally, properties with a Renovation Ratio over 0.50 are considered “heavy renovation.”

Rent Roll — A rent roll is a document that details a rental property’s tenant base and income stream. Landlords should maintain a rent roll for their own use and to share it with potential investors.

SFR — SFR stands for single-family rental. It can similarly stand for single-family residence. An SFR is a stand-alone property designed to house one family as opposed to a rental property such as an apartment building that contains multiple residences within a single property.

Chapter 8

Get A Quote

Interested in getting a quote from VCREF? You’ll need to provide the following information:

  • Addresses
  • Property types
  • Taxes
  • Insurance
  • HOAs (if applicable)
  • Current monthly rents
  • Purchase price/purchase dates
  • Renovations (if applicable)
  • Total cost basis
  • Your opinion of a property’s value
  • Whether properties are leased/lease-ready

Once our origination team receives all the necessary information, we can provide you with a soft quote within just 24-48 hours. 

Get started!

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