Single-Family Rental Portfolio Financing

The single-family rental (SFR) industry is flourishing, and it’s no wonder since these properties offer strong investment potential while serving individuals 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% 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% 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 loan products are ideal for many rental property investors.

Chapter 1

Why Consider VCREF for Your SFR Portfolio Financing?

Verus Commercial Real Estate Financing (VCREF) offers SFR portfolio financing options that are exceptionally flexible, streamlined, and competitive.

Flexible

VCREF’s SFR portfolio financial products are tailored to your needs. We can accommodate a variety of transactions, including acquisitions, stabilizations, lease-ups, renovations, and cash-out refinances.

After submitting an application, borrowers are paired with a VCREF originator who helps structure a loan that achieves the borrower’s goals, even if their situation is unique or their portfolio is nontraditional. We offer a wide range of loan sizes and term lengths. Additionally, we have a variety of loan features available, including interest-only payments, loan assumability, and nonrecourse options.

Streamlined

VCREF keeps paperwork simple and offers a fast response time so you can enjoy efficiency and convenience throughout the application process. We use an easy online process for lending that you can complete from anywhere, so there’s no need for in-person meetings.

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. We also help investors eliminate costs when making a series of bridge loans for SFR portfolios through our SFR Guidance Line.

Chapter 2

SFR Portfolio Permanent Loan

If you’re looking for a way to consolidate your debt under one umbrella or you’ve hit your loan maximum with your local bank and are in need of additional financing resources, the SFR Portfolio Permanent Loan from VCREF is a valuable solution. This loan product is intended for stabilized portfolios that have an occupancy of at least 90%.

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

SFR Portfolio Permanent 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% of the loan amount and a liquid net worth of at least 5%.
  • Properties are at least 90% occupied by loan closing.
  • Any properties not leased are in leaseready condition.

SFR Portfolio Permanent Loan Terms

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

  • Term to Maturity: 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%
  • Recourse: Nonrecourse
  • Payments: 30-year amortizing payments or interest only
  • Assumability: Assumability options available
  • Substitution: Property substitution options available
  • Citizenship: U.S. citizens and foreign nationals encouraged to apply

Chapter 3

SFR Portfolio Bridge Loan

The SFR Portfolio Bridge Loan from VCREF is an excellent option for obtaining funding during transitional periods or to acquire more properties. For example, if your SFR portfolio requires a renovation or lease-up, you can get the financing you need through a Bridge Loan and then eventually roll this into a SFR Portfolio Permanent Loan.

SFR Bridge Loan Parameters

VCREF’s basic parameters for the SFR Bridge Loan include: 

  • The portfolio consists of at least three properties at close.
  • 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 total net worth of at least 25% of the loan amount and a liquid net worth of at least 10%.
  • No occupancy requirement at closing, but properties must be at least 90% occupied by maturity

SFR Portfolio Bridge Loan Terms

The SFR Portfolio Bridge Loan from VCREF offers the following terms:

  • Term to Maturity: 2 years plus extension options
  • Purpose: Renovations and lease-ups
  • Loan Size: $1,000,000-$15,000,000
  • LTV:
    • 80% As-Is LTV
    • 90% LTC
    • 70% ARV LTV
  • Recourse: Nonrecourse
  • Payments: Interest only
  • Citizenship: U.S. citizens and foreign nationals encouraged to apply
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Chapter 4

SFR Portfolio Guidance Line

VCREF offers an SFR Portfolio Guidance Line of Credit that serves as a more flexible alternative to a traditional line of credit. With the SFR Guidance Line, investors can negotiate terms once and then readily access the bridge financing they need for acquisitions, stabilizations, and lease-ups of SFRs for three years. Borrowers draw on the facility as needed and pay interest only on the amount drawn.

The Guidance Line often serves as a helpful starting point before moving to a SFR Portfolio Permanent Loan.

SFR Portfolio Guidance Line Parameters

VCREF’s basic parameters for the SFR Guidance Line include:

  • The portfolio consists of at least three properties at close; each advance may have as few as 1 property.
  • 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 total net worth of at least 40% of the loan amount and a liquid net worth of at least 10%.
  • No occupancy requirement at closing, but properties must be at least 90% occupied by maturity.
  • Legal fees are only charged at the establishment of the facility.

SFR Portfolio Guidance Line Terms

Our SFR Guidance Line offers a great deal of flexibility, including the following terms:

  • Term to Maturity: Facility available for 3 years with up to 2 years maturity (plus extension options) for each advance
  • Purpose: Acquisitions, stabilizations, and lease-ups
  • Facility Size: $5,000,000-$15,000,000
  • LTV:
    • 80% As-Is LTV
    • 90% LTC
    • 70% ARV LTV
  • Recourse: Nonrecourse
  • Payments: Interest only
  • Citizenship: U.S. citizens and foreign nationals encouraged to apply

Chapter 5

Getting a Loan from VCREF: Our Process Step by Step

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

  1. Inquiry Submission: You start by submitting an inquiry and completing our property information workbook. Information required includes your opinion of property value, current lease information, taxes, and more.
  2. Term Sheet Creation: A VCREF originator reviews the loan options available and, when one is chosen, has 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, etc.
  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 schedule the closing and generally lock your rate the week of closing.
  6. Loan Closing: Your loan is closed!

Chapter 6

Frequently Asked Questions

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

Can I start with one financial product and transition to another?
Yes, both the SFR Portfolio Guidance Line and SFR Portfolio Bridge Loan can roll into the longer-term SFR Portfolio Permanent Loan. For example, you could use the SFR Bridge Loan or Guidance Line to acquire properties, renovate them, and lease up the portfolio. You could then transition to an SFR Portfolio Permanent Loan once the properties meet the necessary requirements. VCREF will waive the exit fee from an SFR Bridge Loan if it is rolled into an SFR Portfolio Permanent Loan.

I’m a foreign national. Can I apply for a loan in the SFR Portfolio Platform?
Yes.

Where does VCREF lend?
VCREF provides capital solutions for commercial real estate throughout the United States. Contact us for details. 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,” including townhomes, condos, student housing, community housing, small multifamily, and others. 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?
VCREF has options for hybrid appraisals, which can speed up the process to close and save you money compared to the extended time and costs involved in obtaining full or traditional appraisals for your properties.

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 SFR Portfolio Bridge Loan instead of the SFR Portfolio Permanent Loan.

What other types of loans does VCREF offer?
VCREF offers both a Short-Term Bridge Loan and Intermediate Bridge Loan for a variety of commercial real estate properties, such as office, retail, multifamily, industrial, hospitality, mixed-use, and more. 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.

Is there a prepayment penalty?
There is no prepayment penalty for the SFR Portfolio Bridge loan. However, VCREF offers several prepayment structures for the Permanant Loan 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% loan-to-value.

Are your rates competitive?
VCREF’s SFR Portfolio Permanent Loan rates in the mid 4%’s 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. VCREF’s SFR Portfolio Bridge Loan provides rates starting at 5.99%. Contact VCREF to learn more.

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

Is VCREF’s loan non-recourse?
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?
We can close in as few as 45 days.

What amortization options does VCREF offer?
VCREF offers both 30-year amortizing and interest-only options for the SFR Portfolio Permanent Loan. SFR Portfolio Bridge Loan is interest-only.

What is the minimum DSCR for the SFR Permanent Loan?
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 10% of units are allowed to be vacant prior to closing an SFR Portfolio Permanent Loan. If you need time to lease-up, a SFR Portfolio Bridge Loan is a good option. Once leased, you may then refinance to an SFR Portfolio Permanent 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 loans or discuss this topic with a lender:

  • CapEx — Capital expenditures (CapEx) are funds allocated toward maintaining or enhancing rental properties.
  • Cap Rate — Capitalization rate, or “cap” rate, is calculated by dividing a property’s net operating income 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 is calculated as renovation costs/as is property value and is used to gauge the extent of planned renovations on a property. Generally, properties with a renovation ratio over 0.50 are considered “heavy renovations.”
  • 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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Single Family Rental Portfolio Financing