Rental Portfolio Loans in Florida for Multiple Properties

Are you an experienced real estate investor with 3 to 7 properties or more? Chances are, you’ll have a hard time getting financed using a traditional bank mortgage.

But a rental property portfolio loan in Florida can help you buy or refinance multiple investment properties, all with a single loan.

Real estate investors with multiple properties use rental portfolio loans to accomplish a variety of objectives:

• Lowering their overall interest rate or cost of capital
• Transitioning from short-term funding to a long-term financing solution
• Simplifying their finances
• Unlocking equity
• Doing remodels, repairs, and improvements
• Raising cash to acquire new properties

While we have a wide variety of investment property loans in Florida available to help our clients, the portfolio loan is one of the most potent solutions on the market for landlords who own multiple cash-flowing rental properties.

What is a portfolio loan mortgage?

A rental portfolio loan is a financial tool for real estate investors owning multiple rental properties (usually at least 5 to 7 properties). It consolidates any existing mortgages into one single loan, offering flexibility in terms and conditions. This streamlines monthly payments and simplifies debt management for the investor.

Background: how rental portfolio loans provide a much-needed solution

Most large traditional, high-volume banks just want to originate loans. They don’t want to carry the risk on their own books, and they don’t want to be in the loan servicing business. They’d much rather stick to the qualifying mortgage (QM) market, and sell their loans to Fannie Mae and Freddie Mac as fast as they can close them.

But Fannie and Freddie both have strict underwriting standards. They only deal with individual buyers. They cap qualifying mortgages at 10 simultaneous loans per buyer. And they impose significant income verification, credit score, and other requirements on top of those. As a result, they can take a long time to close. To learn about alternative mortgage lenders who allow more than 10 simultaneous loans, read our guide, How Many Mortgages Can You Have?

Meanwhile, carrying too much real estate on your own personal credit report can make it difficult to qualify for new mortgages. Portfolio lenders in Florida typically only count 75% of the rental market value towards your personal income when they use standard mortgage underwriting. This artificially depresses reportable income. This, in turn, reduces the amount of new financing you can qualify for using traditional income-based underwriting.

For example, you could have a portfolio of mature and stabilized rental properties with a strong track record of generating $100,000 in net rents each year, but a QM mortgage lender who is focused only on reselling your loan upstream to Fannie Mae or Freddie Mac can only credit you with $75,000 of that money.

These restrictions can make it difficult for multi-property real estate investors to do business.

In these situations, landlords need other options designed specifically for serious investors with multiple properties.

Enter the portfolio loan in real estate.

How portfolio rental loans in Florida work

Portfolio loans are typically issued by portfolio mortgage lenders. That is, banks that lend on your investment portfolio, and plan to hold the loan long term on their own books, as part of their own investment portfolio.

These lenders are almost never big banks. They tend to be specialized finance companies, hedge funds, private debt companies, and small local and regional bank lenders. These institutions tend to focus on markets that large household-name bank lenders neglect.

If your bank turns you down, don’t get discouraged: There is an active and lively market for these types of loans, and for brokers like us who specialize in this niche.

Because the lender is retaining the risk, real estate portfolio loan rates are usually slightly higher than in the qualifying market. But for investors, the advantages of portfolio loans for rental properties more than outweigh the slightly higher costs.

Advantages of a real estate portfolio loan

Because portfolio lenders plan to keep your real estate portfolio loan on their own books and retain the risk themselves, they don’t need to worry about other institutions’ underwriting requirements or government underwriting requirements.​​ They, therefore, have much more flexibility when it comes to underwriting your business portfolio loan for investment properties.

As a result, it’s much easier for people with multiple simultaneous mortgages, credit challenges, difficult-to-verify income, a high debt-to-income ratio, foreign citizenship or residency, or other issues to qualify and get funded for a non-QM portfolio loan than for a traditionally-underwritten mortgage from a large bank lender.

Portfolio loans are usually primarily asset-based. That is, they are issued based primarily on the market value and demonstrated rental income of the underlying properties. Your personal or business credit, tax returns, verification of other income, debt-to-income ratio, and other factors are either a secondary concern or are complete non-issues.

Because they are asset-based, underwriting is much simpler and quicker. Unlike conventional bank mortgages, most portfolio loans can be funded in weeks, not months. Especially if appraisals are already lined up or in hand.

Recourse vs. non-recourse debt

Another advantage of portfolio lending vs traditional lending practices is that you can structure your loan to be non-recourse. That means the loan is secured entirely by the properties alone. In the event of a default, the lender can only foreclose on the properties pledged as collateral. They cannot go after your own personal assets or those of your partners. There is no personal guaranty.

This is helpful in keeping the debt off your personal credit report. A non-recourse loan is a liability on your entity’s books – but not on your own personal credit history. It won’t be a factor in your personal debt-to-income ratio on future credit applications.

This can help preserve your ability to obtain credit for other purposes, such as a mortgage on your personal residence, a car loan, or anything else. In short, it allows you to borrow more, if needed.

Structuring debt as non-recourse is also an important consideration for any borrowers in general partnerships, syndications, funds, and joint ventures, where every partner is jointly and severally liable for the obligations of all the others. Structuring a loan as non-recourse is vital to limiting risk to each of the partners.

It’s also critical for real estate IRA investors, because the law prohibits pledging an IRA asset as security for a personal loan. All mortgage debt on real estate IRA properties must by law be non-recourse debt. Otherwise, the IRS will deem the loan to be a prohibited transaction, disallowing the IRA and generating significant taxes and penalties.

Drawbacks to be aware of

While rental portfolio loans can be beneficial for investors with multiple properties, it’s essential to consider the following drawbacks carefully.

1. Higher Fees and Interest Rates: Portfolio loans often come with higher fees and interest rates than traditional financing. This is because portfolio lenders face increased risk when lending to borrowers who might not qualify for conventional loans. Borrowers can expect interest rates to be 2-4% higher than current market rates, alongside higher closing costs.

2. Prepayment Penalties: Another significant drawback is the potential for prepayment penalties. If you decide to pay off the loan early, you might incur additional fees. These penalties are in place to allow lenders to recover costs involved in loan origination. It’s crucial for borrowers to thoroughly review and discuss any prepayment clauses in the loan agreement to avoid unexpected charges.

Balancing the potential benefits against the increased costs and restrictions is key to making an informed financial decision.

Who needs a rental portfolio loan in Florida?

If you are an investor or developer with at least 3 different investment properties and a 12-month track record or longer as a real estate investor, a rental portfolio loan in Florida can be a great solution for you.

Especially if any of the following circumstances apply:

• You want to clear your personal credit and move your investment properties and mortgages into a separate entity under a single convenient loan.
• You want to simplify your finances and only worry about a single loan payment each month.
• You want to close quickly, with a minimum of underwriting hassle or paperwork.
• You have credit or income verification challenges, or you are self-employed.
• You’d rather have an asset-based loan than one based on income verification and underwriting.
• You can get a better interest rate with a single large loan than you can with multiple small mortgages.
• You have short-term or construction loans and you want to transition to a longer-term loan at a lower interest rate.
• You want to generate cash fast for a down payment on a new property. This gives you a major competitive advantage over other bidders who have to make offers contingent upon lining up traditional financing (with all the delays that entails). Asset-based portfolio loans can close and fund much more quickly than conventionally-underwritten mortgages.

Again, portfolio lenders look carefully at your track record and experience level. Generally, they’ll want to see at least twelve months of successful real estate cash flow for at least one of the last three years. Portfolio loans aren’t a solution for novice investors in their first year in business.

If this situation applies to you, call us for some alternative lending solutions that don’t rely on your experience level.

Portfolio loan requirements

How to qualify for a portfolio loan? First and foremost, rental portfolio lenders rely heavily on a metric called the debt service coverage ratio, or DSCR. The ratio is the net operating income across all the properties included on the loan divided by the costs of debt service (mortgage payments and interest).

The higher your debt service coverage ratio, the more options you’ll have.

Because the lender is looking entirely at the investment and cash flow properties of your real estate portfolio itself, they typically don’t need your personal tax returns, personal credit history, debt-to-income ratios, or other such information. The properties themselves are sufficient to collateralize the loan.

Most of the time, you can expect lenders to require you to maintain a DSCR of at least 1.10 to 1.25 on each financed property throughout the life of the loan.

The lender will ask you for a current ‘rent roll,’ and possibly enough information to verify your rent roll numbers via business bank statements, etc.

Lenders will usually calculate your net operating income by deducting expenses from your rent roll numbers themselves.

You can expect lenders to consider lending up to 75% LTV, or 70% LTV for cash-out mortgages.

Types of real estate portfolio loans available

How much can I borrow using a portfolio loan for investment property?

Loan amounts are determined by the collateral and the DSCR, but range from about $200,000 on the low end to $10 million, $20 million, or even more. If the collateral and rental income is there to support the loan, there is no upper limit on the amount of the portfolio loan you may qualify for.

Blanket mortgages

A blanket mortgage is a specific type of portfolio loan. These cover five or more stable cash-flow positive properties under a single loan. Investors usually get these loans to consolidate multiple smaller mortgages into one big one, and therefore qualify for a better interest rate than they are currently paying on their smaller mortgages.

Lending is like any other business – you can frequently get a ‘volume discount’ if you’re a proven borrower looking to take out a single large loan. You can also save on closing costs by using a single large blanket multi-property loan instead of several smaller loans.

Blanket mortgages allow real estate investors to take advantage of ‘wholesale’ vs ‘retail’ prices on larger loans.

To be competitive for a blanket mortgage, you’ll want to have each property already leased, with a verifiable income track record of at least 3 to 12 months.

Normally, a portfolio lender for an investment property collection will consider blanket loans of up to 75% LTV, or 70% for cash-out refinances.

Portfolio bridge loans

Portfolio bridge loans are shorter-term rental portfolio financing solutions that are ideal to fund a construction project, or to get a property ‘rent ready’ after a tenant leaves. With a portfolio bridge loan, you borrow against your portfolio, fund the project, and then, upon completion, transition to a more permanent loan at a lower interest rate.

Terms usually range up to 12 to 18 months. Lenders may consider up to 90% ‘loan to cost’ or LTC. That is, they may lend up to 90% of the projected cost of your construction or renovation project under this loan, or up to 75% of the after-repair value (ARV).

Portfolio loan cash out refinance

A portfolio loan cash out refinance is a strategic financial maneuver for property investors. It allows them to tap into the equity of their multiple rental properties by refinancing the existing mortgages into a new one at a higher amount than owed.

This process not only consolidates their property debts under one manageable loan but also provides them with extra cash, which can be used for property improvements, further investments, or other financial needs. This type of loan is particularly useful for investors looking to expand their portfolio or optimize their investment’s cash flow.

Single family portfolio loans

Single-family rental portfolio financing is a specialized loan option tailored for investors with multiple single-family rental properties. This financing approach allows investors to combine mortgages for several properties into one single loan, streamlining management and potentially improving financial terms. It’s an efficient way to leverage existing property equity, enhance cash flow, and fund further property acquisitions or renovations. When opting for single-family rental portfolio financing, it’s crucial to evaluate the terms carefully, as they can vary significantly from traditional single-family property loans. This includes assessing interest rates, fees, and flexibility in loan structuring, ensuring it aligns with the investor’s long-term financial strategy.

What types of properties qualify for a portfolio rental loan in Florida?

You can get a portfolio rental loan in Florida on nearly any type of property. These include:

• Single-family residences
• Duplexes, triplexes, and quads
• Apartment buildings
• Condominiums
• Townhomes
• Commercial buildings
• Modular construction homes
• Leaseholds
• Short-term rentals

…and more.

You can use portfolio loans to do straight refinances, rate-and-term loans, purchase additional properties, upgrade properties, or unlock equity for any purpose using a ‘cash-out’ refinance.

In practice, portfolio lenders are looking for stabilized, rented properties with a track record of verifiable rental income. They typically don’t lend on new construction projects, though you can certainly take a portfolio loan to finance new construction or acquire a different property. In fact, many successful investors routinely do just that.

How do I get a portfolio loan for multiple properties?

Portfolio lenders are usually smaller and more niche businesses that operate ‘under the radar.’ They can be difficult to find. Sometimes they don’t advertise the type of lending that they do as ‘portfolio lending.’

Usually, the best approach to getting started is to work with a mortgage broker who specializes in the portfolio lending business.

An experienced broker already knows which lenders may be interested in properties and risk profiles that match yours, and who are actively looking to lend money at the moment.

We can help you prepare your documents, and get them in front of the right lenders from the start. That saves time, and gets you funded much faster, with the best possible terms.

What to do now

If you’re a seasoned real estate investor in Florida grappling with the challenges of financing multiple properties, it’s time to consider a rental portfolio loan. These loans offer a viable alternative to traditional bank mortgages, especially for those owning 3 to 7 or more properties. They provide a way to streamline your finances, unlock equity, and potentially lower your cost of capital. Let us help you navigate the complexities of rental portfolio loans and find the solution that best fits your investment strategy.