Making sense of today's financing world for SFR investors

Today's financing environment for single-family rental (SFR) investors can be very challenging. Using conforming loans (i.e. agency paper) the investors is able to finance up to 10 SFR, IF his debt-to-income is sufficient. The DTI is too-often a hurdle for us real estate investors, so more likely you can use this type of financing for 4-6 rentals. 

Secondly, you can turn to the commercial side of a local, regional or national bank. These are balance sheet loans that a bank would carry on there balance sheet. While the terms often do not exceed 25-yr am, the rates are often attractive. However, any bank will be very conservative on the leverage and will want to extend credit to only highly qualified individuals. These loans will also be recourse - which means if the economy goes belly up and you default on the loan the lender will come after your personal assets. 

Then you have hard money lenders. HM is great if your credit is restricted, maybe you tapped out of the above two options, but you need the cash and are willing to except this short term money at higher rates. 

Lastly, portfolio lenders or non-bank institutional lenders who specialize in SFR investor loans offer both non-recourse and recourse loans available on 30 yr amortization schedules at moderate rates. These are loans that are primarily driven by DSCR not the individuals credit. 

An important thing to always remember, which I too often forget, is amortization length often beats rate if you are searching for cash flow. While a lender will offer 5% on a 20 yr am, double check and make sure your cash flow isnt better with 6.% at 30 yr am.