How to find financing for small investor clients

by MPA23 Mar 2015
In the aftermath of the financial crisis, around 4.5 million homes have been sold and converted to rental properties with the majority owned by small investors. While big investors can self-finance their acquisitions, small to midsize landlords intent on cashing in on distressed properties are left with very few viable financing options.

But traditionally, they have had limited access financing.

Fannie Mae and Freddie Mac limit the number of investment property mortgages to one investor at four and 10, respectively. Agencies will cut the number sooner if a borrower does not have the personal income to qualify, which is often, Mark Mohl, senior account executive at B2R Finance, said.

Cue in B2R Finance. The company is one of a few in the country that focuses on lending money to landlords interested in expanding their single-family, home–to-rent portfolio.  They finance residential rental properties, including single-family, small multifamily properties, condos and townhomes.

“We can help brokers who couldn’t find financing for their investor clients,” Mohl said. “Our product provides brokers with more tools to help their clients – they don’t have to turn away buy-to-rent investors any longer.”

According to B2R Finance, buy-to-rent investors will purchase an average of seven times the number of properties as each owner-occupied borrower.  Not only does this product line help with client retention, but it also results in a lower customer acquisition cost for brokers by having continuous repeat business.

Emerging single-family rental sector

Most investors look at residential rental property as a long-term investment. The cash flow stream, home price appreciation and tax benefits are attractive to those looking for alternatives to traditional investments like stocks and bonds.

Today, there are millions of these smaller buy-to-rent landlords and this growing group is cashing in on the share of Americans that prefer to rent instead of own.

Millennials are a strong factor driving investor appetite for buy-to-rent homes. Home ownership among those 35 and younger has fallen from 43.6% to 35.9% during the last 10 years. In February, housing starts fell 17% nationally, the U.S. Commerce Department reported.

Weak job growth and wage gains among millennials don’t have the group looking to buy anytime soon.

How do you find financing for buy-to-rent investors?

When the single-family rental market emerged in 2012, it was largely the domain of financial services giants with deep pockets, but that’s no longer the case. B2R Finance, for example, focuses on the rental properties’ expected cash flow when making a lending decision rather than a borrower’s income.

B2R offers loans of up to 75% of home values for pools of leased properties.  The company’s minimum loan size is $300,000 and provides five- and 10-year terms with up to a 30-year amortization schedule. Financed properties need to be no less than 60% residential.

Mohl said B2R is continuously developing financing options to service investors of all sizes. He added that the company fills a void in the marketplace. "There's a huge demand for investment properties, and I think there always will be."



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