Must-know facts about Single Family Rental Property Loan

 

Of course, if you are seeking to acquire rental properties, getting the funds needed to purchase, or to re-finance can be a difficult process. But, there are loans meant for investors in multifamily (5+ units) apartment buildings and single family rental homes. They offer less stringent qualifying requirements than the typical mortgage loans.

If you intend to invest in rental housing, there is a high likelihood that you will have to use debt to get your targeted returns. Selecting the right finance option is crucial since it determines your working capital, exit plan, and so on. This article will discuss the various sources of funding for multi unit and Single Family Rental Property Loan.

 

Single Family Rental Property Loan

Multifamily Loans

This creates the opportunity for residential type financing treatment.

Agency Loans – Available through Fannie Mae, Freddie Mac, and HUD, agency multifamily loans provide relatively low interest and long terms. But they also demand more documents, capital expenditure reserves, and maximum loan to value constraints.

Bridge Loans – Specifically meant to be used in a gap where one is in the process of purchasing property and getting long term funding. Bridge multifamily loans are interim (6 months to 3 years) and have less rigid qualification criteria. But they attract higher rates and have intensive exit strategy measures.

CMBS Loans – Commercial mortgage backed securities loans are likely to have a higher loan-to-value ratio. However, they typically have high prepayment penalties, not very favorable during an economic decline, and credit standards are again moving up toward pre-crisis levels.

 

Single Family Residency for Rental Property

Single family rental loans are now catering specifically to professional investment firms with an aim of building large scale portfolios. Options include:

Fixed & ARMs – Some portfolio loan programs that used to be exclusive to the traditional property owners have adopted single family rental investors. These are suitable to some extent in case of an investment property but have lesser investor rights than other specialized products.

Single Family – Bridge loans: Similar to multifamily, single family bridge loans offer a short term fix while searching for permanent financing. This makes it possible for investors to immediately seize purchase chances.

Bulk Portfolio Programs – Designed for institutional investors, these offer streamlined loan qualifying to fund 100+ properties in one transaction. There are lending programs for purchase/rehab, financing and cash-out refinance.

In any case, the message is clear: today there are numerous funding options for obtaining debt for investments in rental housing. Knowledge of the available resources is critical in establishing the appropriate capital stacks for rental property deals.