Financing a Single-Family Rental Community

Our firm previously was LP for a joint venture with a Sponsor to develop approximately 250 single family, for rent homes in Texas/Arizona. The honest answer is that this asset type is so novel to most lenders that they do not know how to approach it. We found that regional lenders were the easiest ones to work with as they were at least familiar with the markets and products we were operating in so we could sell them on the exit option of selling the homes. All that being considered, they still underwrote it as a traditional apartment acquisition and development loan.

As you alluded to, the most efficient form of financing for these projects is a line of credit coupled with an land acquisition loan. This way you can leverage up the land purchase while minimizing borrowing costs. Assuming you have an efficient general contractor it should be an 120 day build time from "blue top" (all horizontal work complete) for entry level housing and rental contracts are executed much quicker than home sales. Plus institutional borrowers (such as Blackstone, iStar, American Homes for Rent) typically have their corporate balance sheets to borrow against so they have ridiculously cheap borrowing terms.