Benefits of Rental Portfolio Loans for Real Estate Investors

Rental portfolio loans help real estate investors secure financing for various rental properties.

This type of financing offers greater speed and flexibility, with terms that suit the unique needs of a particular investment opportunity.

In this article, we’ll explore the benefits of rental portfolio loans for investors, including how to qualify with Park Place Finance.

What is a rental portfolio loan?

Rental portfolio loans can be used to purchase or refinance a rental property without using your income to qualify. Instead, these loans are focused on the cash flow of the property.

Lenders often use debt service coverage ratio (DSCR) to determine whether the property’s income can sufficiently cover its expenses.

DSCR is calculated using the following formula:

DSCR = Net Operating Income (NOI) / Total Debt Service

Total debt service includes:

• Principal payments
• Interest payments
• Property taxes
• Insurance premiums
• Homeowners association fees

A DSCR above 1.0 means the property has a positive cash flow, while a DSCR of less than 1.0 means the expenses exceed the rental revenue and the property has a negative cash flow.

Benefits of rental portfolio loans

Rental portfolio loans offer numerous benefits to investors.

They open the door for investors who may otherwise need help to qualify for a loan from a traditional lender based on their personal financial situation.

Let’s look at the range of benefits of rental portfolio loans for savvy real estate investors.

Rapid approval and funding

Rental portfolio loans from hard money lenders are known for their speed.

This is often why they are considered the gold standard of financing for investors: They allow these borrowers to access opportunities that would be difficult or impossible to achieve through other means.

Rental portfolio loans often can be closed within two to three weeks, with quick approvals based on years of lending experience.

Approval not based on personal income

One reason approval and funding can happen so quickly is due to the approval process.

While traditional financing institutions focus heavily on a borrower’s personal credit, employment status, and proof of income, hard money lenders are much more flexible.

This is because they are focused more on your cash flow and whether you can easily cover your debts with your rental income.

The overall process is more streamlined and efficient, with the main focus on your properties rather than yourself.

Long-term, fixed-rate options

Hard money loans are known to be short-term because they commonly finance fix-and-flip or construction projects. 

Still, many lenders today also provide long-term options for rental properties.

Park Place Finance offers DSCR loans with 30-year fixed rates.

No limit to number of properties

Managing your properties is simple when all of them are under one roof, figuratively speaking.

Hard money lenders generally have no limit to the amount of investment properties you can finance.

That means borrowers have one contact for all their properties and servicing needs.

This flexibility highlights the importance of a close working relationship with your hard money lender, who wants to be around for years of lucrative deals.

Higher loan amount limits

DSCR loans often have higher limits than other loans—especially for investment properties.

This allows investors to pursue larger and more lucrative investment opportunities and expand their portfolios more rapidly.

Higher loan amounts also give investors a competitive edge in the market.

Loan options tailored to investor’s needs

Lenders specializing in rental portfolio loans can customize loan terms, repayment schedules, and interest rates to align with an investor’s needs.

They also can accommodate investors with non-traditional income sources, varying credit histories, or complex property portfolios.

Beyond these loan options, hard money lenders are trusted advisors to real estate investors, providing valuable insights and expertise throughout the financing process.

How to qualify for a rental portfolio loan

The criteria for rental portfolio loans will vary by lender, but consider the following steps to help you prepare.

1. Determine your financial readiness

Are you eligible for a DSCR loan?

Eligibility for hard money loans looks a lot different than conventional loans.

Here’s what Park Place Finance expects:

• Minimum credit score of 660
• Minimum DSCR of 0.75
• Purchase loan-to-value (LTV) up to 80%
• Cash-out refinance LTV up to 75%
• Single-family homes, duplexes, triplexes, quadplexes, warrantable condos, urban and suburban properties
• Loan amounts $100,000 to $2,500,000
• Long-term or short-term rentals, vacant, Airbnb

Be sure to review your cash reserves and existing real estate portfolio.

2. Calculate your DSCR

Park Place Finance accepts a minimum DSCR of 0.75, but higher is always better.

Aim for a DSCR above 1.0 to demonstrate that your rental income exceeds your debt obligations. 

If your DSCR falls below the desired threshold, consider strategies to increase rental income or decrease expenses to improve your loan eligibility and maximize cash flow.

3. Prepare your documentation

Hard money lenders don’t need to verify your income or see your tax returns, but they will request the following types of documentation:

• Purchase contract (if applicable)
• List of real estate owned
• Most recent two bank statements
• Property insurance
• Subject property lease
• LLC/entity docs (if applicable)
• Loan payoff (if refinance)

Organized and accurate documentation streamlines the qualification process and demonstrates your financial stability to lenders.

Apply with Park Place Finance

Park Place Finance’s DSCR loan rates are near conventional rates but with more investor-friendly loan options.

Our DSCR loan does not report to credit and will not affect your future ability to qualify for additional properties.

We are your trusted hard money lender, with over $1 billion in loans funded nationwide across 17 years in business.

To get started, complete our brief online form or call (866) 407-1599 to speak with one of our dedicated Account Executives.