How do people make portfolio loans work on SFRs?

Question

I'm running the numbers on an 80k example house in an Ohio market. 20% down works with a 4% rate at 30 year amortization. Switching to 7% at 25 years the numbers go bad.

Here's an example: 80k house, $800 rent, 54k mortgage, 6.8% rate, 25 year term. COCR 1% and DSCR of 1.06 means the financing converts it to a non-opportunity:

Am I missing something guys? I haven't even included points into the above. Seems impossible to make commercial loans work on SFRs even in cash flow markets. Yet others post here that they're making it happen. My guess is:

1. They're coming with maybe 50% down

2. Or they get deals deeply under market

Account Closed · Answer

1. the financing portion can be better. 20% down, 5.5% on 30-year is possible

2. the expense ratio 50% may be too high for this small house. Do you have the actual numbers?

Dave Poeppelmeier · Answer

I agree, I think the expenses are way too high. I will tout the BP Calculators until the cows come home...

Now this is Student Housing, so the returns are better (which is why I do it...) but this shows a much more specific breakdown than the 50% rule. This is also a commercial loan, 4.45% 20 yr amortization, 10 yr note with 5 yr ARM. If you can still get a 30 yr fixed from a bank in your name then go for it, but otherwise it can be done with Commercial loans on SFHs.

Michael Magno · Answer

@Gary Dezoysa

Ah that’s good to know. You can get much more favorable terms that what you using in your analysis.

I am an agent and investor in Ohio.  I’ve got lenders offering 20% down products, with 30 year terms, and rates in the 4’s depending on DTI, credit, etc.

Gary Dezoysa · Answer

Hi @Michael Magno, i'm just putting in sample numbers for an SFR in my target market.

Michael Magno · Answer

Gary- Is this a house? A duplex?  Some type of commercial property?

Gary Dezoysa · Answer

Wow, those sound like residential mortgage numbers! As to the expense ratio, noted and thanks as well. Lowering it to 40% seemed to fix everything.

How do people make portfolio loans work on SFRs?

Most Popular Reply