Lending on a 20 Single Family Home Package

[Zachary Carver]

I am going to shop our local banks next week for lending on 20 properties at once. I have a relationship with these banks but the deal is pretty skinny for the first year. My proforma numbers put the debt coverage at 1.16. Anyone know of the right loan broker to take this too?

[Account Closed]

@Zachary Carver The debt coverage at 1.16x might not pass bank underwriting since the asset isn't throwing off a 1.20 dcr. However every lender is different (especially banks). Have you looked into DSCR loans? A DSCR loan does not collect personal income, tax returns, or debt obligations to qualify you for the loan. A DSCR loan is only concerned that the asset is able to cover the PITI at a 1:1 DSCR.

[Jason Shackleton]

Hey @Zachary Carver

What is the average price of the properties in the portfolio?

[Sean Thompson]

Reach out to DSCR lenders. Keep in mind each lender may calculate the DSCR different but many have a 1.10 minimum so you shouldn't too many issues finding them.

[Robin Simon]

Quote from @Sean Thompson:

Reach out to DSCR lenders. Keep in mind each lender may calculate the DSCR different but many have a 1.10 minimum so you shouldn't too many issues finding them.

Just FYI DSCR minimum on portfolio loans is generally higher, typically 1.20x or 1.25x

[Beth Johnson]

@Zachary Carver

Is the DSCR calculated on 20-, 25-, or 30-yr amortization? If it's 20 or 25, shop around for a 30-yr so your hitting the right DSCR. I found local banks offer better terms on commercial blanket loans.

[Robin Simon]

Quote from @Beth Johnson:

@Zachary Carver

Is the DSCR calculated on 20-, 25-, or 30-yr amortization? If it's 20 or 25, shop around for a 30-yr so your hitting the right DSCR. I found local banks offer better terms on commercial blanket loans.

Interest only is an option as well, would calculate DSCR on the IO payment

[Erik Estrada]

Quote from @Zachary Carver:

I am going to shop our local banks next week for lending on 20 properties at once. I have a relationship with these banks but the deal is pretty skinny for the first year. My proforma numbers put the debt coverage at 1.16. Anyone know of the right loan broker to take this too?

How much are you looking to finance? There are portfolio loans available but there are minimus loan amount requirements. 

[Erik Estrada]

Quote from @Erik Estrada:

Quote from @Zachary Carver:

I am going to shop our local banks next week for lending on 20 properties at once. I have a relationship with these banks but the deal is pretty skinny for the first year. My proforma numbers put the debt coverage at 1.16. Anyone know of the right loan broker to take this too?

How much are you looking to finance? There are portfolio loans available but there are minimus loan amount requirements. 

 *minimum 

[Timothy Hero]

Most of my lenders are 1.1 or 1.15 DSCR requirements.

[Caroline Gerardo]

If the properties are valued under $290000 there are one or two lenders who touch them. What state? Rural ? What are you using for rents? Rent used is market rents that the appraiser verifies. The rate bumps up with interest only or 40 year but look at those tweaks to get the ratio up. Or cut back loan to value to meet the DSCR ratio, as in: more equity needed. Borrower must have cash reserves of 12 months (total the bills on credit report). No other income documentation needed. Higher the FICO the lower the rate.

[Stephanie P.]

@Zachary Carver

DSCR lenders can go below the normal 1.0, but usually there's an LTV hit.

Lots of variables to determine where your loan will go; ltv, loan amount, rate, rents and guarantor's credit to name a few.

[Ryan O'Mara]

@Zachary Carver - There are many DSCR rental lenders. They almost all have min dscr requirements. Many want to see 1.2 or higher. Some go lower like 1.1 or even 1.0. And there are some that have loan options with no dscr analysis. Pricing goes up as you go lower or drop the requirement all together.

But not all dscr lenders will do blanket loans for multiple properties.  That's a whole other factor.  Those that do all have different requirements: min value per property, min loan amount, location, dscr per property, currently leased or vacant, etc...

Without seeing the specifics of the deal and all the properties detailed out, I can't tell you much more than that.  But I'd be happy to take a look if you want.

[Matthew Crivelli]

@Zachary Carver

You're better off to refinancing as single assets. The DSCR will be at least 1.2 and the rate will be much higher with a portfolio loan as compared to single asset refi's. That being said we would be happy to take a look.