Impossible to get a loan on a single family rental

[Daniel Rasmussen]

As the title and description suggest, I feel like I have found myself in the perfect storm of circumstances that have made it impossible to find a lending solution for a single family rental property I am interested in. A little back story on my situation:

I currently own one single family rental (almost identical to the one I am currently trying to purchase) in Milwaukee, WI. It is an 800 square-foot, 2br/1ba single family home in a C neighborhood with a purchase price of $52,500 and a rental rate of $750 a month. I bought this property a year ago and was able to get a 30-year conventional loan with 20% down. I am a resident of California, so I am obviously in an out of state market, which poses its own challenges, as I will discuss below.

The property I am looking at now is virtually identical to the one I own. It is a 2br/1Ba listed at $55k and rents slightly below market to a long-term tenant at $700 a month. As we all know, the economic uncertainty surrounding Covid has caused lenders to shrink and/or restructure their lending capabilities. The lenders that were willing to lend me 80% of $53k last year have now told me they cant go below a $50k or even $100k loan amount.

I have spoken to dozens of credit unions in Wisconsin. The only ones that were willing to lend less than $50k had membership rules that required that I lived in Wisconsin, which I do not.

I have spoken to several banks. Wells Fargo was the only one who was willing to lend on it, and they came back the following week and said they just had an update to their lending standards and that they were no longer lending on any investment properties (which makes no sense to me). 

I have also looked at hard money and personal loans. While those are actually attainable, with the high interest rate, the monthly payments put me in a negative cash flow position. In a best case scenario, even if I were to borrow a small enough amount to maybe break even for the first few years, the amount of money I would have to put down would make my Cash-on-cash return not even worth the investment. 

All this to say I feel like I have exhausted every idea and I am not totally sure if there is actually a viable solution that even exists. I am hoping my trusty bigger pockets community can provide some input/advice that might bring some new perspective.

Thanks, and happy investing!

Daniel