DSCR and Commercial Loan Question - 2+ unit Investment Properties

[Mike Wood]

I have several duplexes that are financed with conventional 30 year Fannie/Freddie investment loans, but I have reached my limit (10). I am wondering how to proceed to acquire more properties. When I talk to my local bank, the options appear to be only a commercial loan with relatively high interest (currently 8.5-10%), 75% LTV max and maximum amortization of 20 years. When factoring in the rate and term, almost every single deal I look at is a looser due to debt service (unless the LTV is something like 50%). I believe the primary issue is the 20 year term on a typical commercial loan.

My current focus is on buying and hold duplex properties, and around me that put the total acquisition costs around $200-250k, with total monthly rents being 1.0-1.3% of the purchase price.  I have also looked into small apartments 4-10 units, but found they have an even harder time to cash flow with current rates.  

While I understand that current CAP rates have not necessarily adjusted to the new interest rates, which might be some of the issues. I am wondering how others have continued to finance purchases beyond the 10 Fannie/Freddie loans (that have very nice rates and 30 year terms).

[Robin Simon]

Quote from @Mike Wood:

I have several duplexes that are financed with conventional 30 year Fannie/Freddie investment loans, but I have reached my limit (10). I am wondering how to proceed to acquire more properties. When I talk to my local bank, the options appear to be only a commercial loan with relatively high interest (currently 8.5-10%), 75% LTV max and maximum amortization of 20 years. When factoring in the rate and term, almost every single deal I look at is a looser due to debt service (unless the LTV is something like 50%). I believe the primary issue is the 20 year term on a typical commercial loan.

My current focus is on buying and hold duplex properties, and around me that put the total acquisition costs around $200-250k, with total monthly rents being 1.0-1.3% of the purchase price.  I have also looked into small apartments 4-10 units, but found they have an even harder time to cash flow with current rates.  

While I understand that current CAP rates have not necessarily adjusted to the new interest rates, which might be some of the issues. I am wondering how others have continued to finance purchases beyond the 10 Fannie/Freddie loans (that have very nice rates and 30 year terms).

Yes, as others have noted, this is typically where DSCR Loans (**not from banks** but from private lenders with national DSCR platforms) are typically the next step here. With a 30-year amort and 10-year IO options - as well as ability to get rate down quite a bit if you have long-term horizon (5+ years so don't mind prepay) - the rates/terms and monthly payment will likely be very attractive.

Others too have done the DSCR Portfolio Loan (Blanket Loan) refinance option too (refinanced the 10 properties that are under conventional into one blanket DSCR Loan and start the process back from 0 on conventional), however, given current rates, don't see it a lot currently since the refinance would typically mean racheting up interest on those