What to Look for When Sourcing a Loan for Your Rental Portfolio

Choosing the right financing tools is critical to maximizing returns on your real estate investments. For buy-and-hold rental portfolio investors, picking the right rental portfolio loan is essential to optimizing current cashflow while balancing your options for a sale or refinance at some point in the future. 

Unfortunately, rental portfolio lenders don’t always make it easy. The huge variety and complexity of available rental portfolio loans – with different rates, terms, eligibility requirements, and even definitions – can require significant time and energy to make the right decision.

Let’s cut through some of the complexity, and help you gain an understanding of the rental portfolio loan market. Here’s what you need to look for when sourcing a loan for your rental portfolio.

What is the right rental portfolio loan for you?

A well-designed rental portfolio loan will allow you to:

• Consolidate debt from various lenders through a single long-term loan at attractive rates, fees and terms.
• Unlock the equity in your property portfolio and provide cash to you for further acquisitions.
• Preserve options to sell or refinance all or part of the portfolio as opportunities arise. 

To pick the right loan for your rental portfolio, first consider the following questions for your situation: 

• Is this investment for current cashflow or potential capital appreciation? Or both?
• What is your expected hold period? Are you looking to preserve your options for a sale if the opportunity arises?
• Which aspects of the loan do you care about the most? For example, rate type (fixed vs. hybrid ARM), maturity (5, 10, or 30 years), maximum leverage, length of IO period, prepayment penalty (yield maintenance vs. annual step down prepay) or guarantee structure (full recourse vs. non-recourse)? 

When experienced rental property investors approach lenders with their portfolios, they are very clear about their investment strategy and their key “asks,” or expectations. This allows them to get the best terms applicable to their specific needs.  

Finding the best lender for your rental portfolio loan

The market today is flush with lenders — the challenge, as outlined before, is finding the right lender with the right products to help achieve your goals. 

Banks and government sponsored entities such as Freddie Mac or Fannie Mae are often the starting point for borrowers looking for a rental portfolio loan. These institutions have a long track record of lending on conventional owner-occupied houses, but their lending on investor-owned rental properties is limited at best. Additionally, they use traditional underwriting processes based on your personal debt-to-income ratio, which can be cumbersome and slow moving compared to private lenders, and impose strict limits on borrower exposure.

In short, these loans are optimized for primary residences, and not for investor loans.

Specialized rental portfolio lenders like Haus Lending 

Rental investors want flexible loan solutions and a range of product options, not a one-size-fits-all approach that currently exists in the market.  Haus Lending has specific loan types to match your rental portfolio needs. Our rental portfolio loan products are unmatched in the range of options we provide, and flexible to meet the specific needs of different rental property investors nationwide. We offer:

• Nationwide funding, with multi-state portfolios allowed under a single loan
• Widest selection of eligible property types, including multifamily and mixed use properties
• 5,10, or 30 year loans
• 30-year fixed rate mortgages (FRMs) or hybrid adjustable rate mortgages (Hybrid ARMs) with 5 or 10 year fixed rate periods
• Interest Only periods from 5 to 10 years
• Flexible prepayment penalty options, ranging from yield maintenance for rate-sensitive borrowers to 3-2-1 easy step down structures for investors with shorter investment horizons
• Loans to foreign investors with prior existing real estate holdings in the U.S.
• Release provisions to allow sale or refinance of individual properties in the portfolio

Make your rental portfolio an engine for personal income growth

To begin a conversation about ways to boost the return on your investment and optimize value, connect with the Haus Lending team at haus.leads@hauslending.com. Or call us at 1-877-GO-4-HAUS. Our experts are passionate about helping investors leverage the income opportunities available in the buy-and-hold rental property market.