One of the pillars of a successful real estate rental portfolio is securing the appropriate sort of financing for each individual property.
Everything from the property's initial purchase price to the cost of renovation and remodeling will affect how much money and financing you'll require.
Most investors use a variety of loans to fund a rapidly expanding real estate portfolio. However, when your property portfolio expands, it can become difficult and expensive to handle various loans with different terms and payments.
Loans against a property's rental history can help with this.
How do rental portfolio loans work?
Investors in real estate often take out rental portfolio loans in order to fund the acquisition of several investment properties at once. Instead of keeping track of many loan payments each month, investors can streamline their finances by bundling all of their properties into a single real estate loan and making just one payment per month.
Features that are typical of rental property loans include:
- Higher Loan Amounts - With a rental portfolio loan, investors can finance many properties with a single loan because the loan ceiling is bigger than with a standard loan.
- Non-Owner Occupied - Loans for rental property portfolios are only available to investors and cannot be used to purchase a primary residence.
- Short-Term Loans - The terms of rental portfolio loans may be shorter than those of conventional real estate loans, typically ranging between five and thirty years.
- Higher Rates - Because of the additional risk involved with a rental portfolio, the interest rate on such a loan may be higher than that on a single real estate purchase.
Who uses rental portfolio loans?
Experienced real estate investors who own a number of rental properties sometimes take out rental portfolio loans to consolidate their debt and make managing their properties easier. Investors who want to take advantage of the scale economies that come with owning multiple rental properties favor them as well.
When should you think about getting a loan for your rental property portfolio?
A real estate portfolio loan has several positive outcomes. Here are some scenarios where you might benefit from a real estate portfolio loan:
- You own several rental homes - If you own a portfolio of five or more rental properties, you may qualify for a lower interest rate and monthly payment by consolidating your debt with this loan.
- You want to buy more homes to rent out - If you want to add to your rental properties, you can use a renting portfolio loan to buy a new one and make your monthly payments more affordable as a whole.
- Increase cash flow - If debt consolidation reduces your monthly payments, you'll have more money to use toward growing your portfolio or paying for other needs.
- Refinance current real estate loans - If the loans you already have in your rental portfolio have high interest rates or unattractive terms, refinancing with a rental portfolio loan could be a viable solution.
- Use your current rental properties as leverage - You can get a rental portfolio loan by using the equity in your present rental properties as collateral. The money you borrow can be used to make improvements to your properties or to buy new ones.
If you are a real estate investor who owns numerous rental properties and would like to increase your income flow, grow your portfolio, or refinance your current loans, a rental portfolio loan may be a smart alternative for you.
How can you get a loan for your rental property portfolio?
Finding a reliable lender to finance your rental property portfolio is the first order of business. Property value and rental revenue are used as collateral in rental portfolio loans, just as they are in DSCR loans, hard money loans, and other real estate loans from private lenders. Find a bank that is willing to offer money specifically for rental properties.
Investors with a rental portfolio consisting of five or more units are prime candidates for a rental portfolio loan. Loan amounts start at $500,000 and have maturities of 10–30 years, depending on the value of your holdings.
You should shop around for a rental portfolio loan that meets your needs in terms of terms, interest rate, and ease of underwriting and approval just like you would for any other type of loan. Your ability to negotiate better interest rates and terms for loans is inversely proportional to the size and value of your real estate portfolio.
Consolidating your real estate portfolio's payments into one loan with a rental portfolio loan will help you save time and effort in addition to potentially saving you money.
When it comes to financing and managing several rental properties, rental portfolio loans can be a useful tool for real estate investors.
Looking for a portfolio loan? We offer portfolio loans to investors that have a minimum of 5 rentals. Feel free to reach out to us with your scenario and we will guide you every step of the way.
