Refinancing Rental Portfolio Loans

As a real estate investor, what are the advantages of a single rental property versus an entire portfolio of rental properties?  In this article we will compare single property loans versus portfolio loan financing and which strategy may benefit you most as an investor.

Whether an investor is looking for a single rental property loan or a portfolio loan, Lima One can finance the purchase or refinance for these assets. We have two loan products that can be used to serve both the purchase and refinance of a rental property. First is the 30-year term 5-1 ARM. When we say, “5-1 ARM,” that means the rate is fixed for five years, and after five years, it floats based on the monthly LIBOR index. We also offer a 30-year fixed loan product, which is simply, a 30-year fixed, fully-amortized loan. That means the rate is fixed at the time of origination and is fully-amortized over that 30-year term.


kitchen in rental home


Now let’s compare our single property loan versus our portfolio loan. A single rental property means one property, and a portfolio of rental properties means two or more properties. So Lima One can lend on either type of property, with 30-year term options on all products. On large portfolios, you’ll also have the option of interest-only balloon loans.

What Is Debt Service Coverage Ratio?

Debt service coverage ratio, or DSCR, is that ratio that takes the rental income divided by the PITI. PITI stands for Principle, Interest, Taxes, and Insurance. In other words, to calculate DSCR, take the monthly rental income and divide it by the monthly expenses measured by PITI. For simple math, let’s do $1,300 (your rental income) divided by $1,000 (your monthly expenses) to get a DSCR of 1.3. There also may be condo or homeowners association fees that apply to the PITI. But as long as this ratio meets the minimum DSCR for the loan you’re considering, that property will be qualified for a loan from Lima One.


Loan Origination Benefits of a Portfolio Loan

Why do investors finance rental properties with rental portfolio loans instead of in single property loans? A big reason is the savings in origination fees. By combining properties, you pay only one origination fee instead of multiple fees. In addition, Lima One’s rental portfolio loans offer benefits such as lower rates, the ability to choose an interest-only payment for five or 10 years, lower DSCR minimums, non-recourse loans, and larger loan amounts.

Interested in obtaining financing for a portfolio loan or a single rental property? Click below to get started today.

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