Episode Summary:
Overview of Episode 87
Craig Fuhr kicks off the episode with a timely discussion on the five-year treasury yield and how it’s rattling investor nerves. If DSCR loans are indexed to the five-year, then shifts in that market ripple across the entire rental loan landscape. Accordingly, investors are asking: Should I refinance now or wait?
Jack BeVier adds context, referencing data from leading financial forecasters predicting a choppy, sideways market over the next 12 months. Although this may be true, lenders haven’t passed on potential savings to investors. Instead, they’ve increased spreads to absorb revenue amid uncertainty. As a result, even though bond yields dipped, DSCR rates stayed flat, fueling frustration among those in the single family rental space.
Introducing Sean Tierney: From Wall Street to Main Street
Afterward, Jack and Craig welcome their guest: Sean Tierney, VP of NTERA, an AI-powered platform built specifically for single family rental investors. But his background isn’t just tech. Before NTERA, Sean worked on institutional desks at Morgan Stanley and later helped launch Freddie Mac’s SFR pilot program.
As a matter of fact, Sean single-handedly raised over $450 million to help institutional investors scale their SFR portfolios. Not only does he bring capital markets expertise, but he also understands the boots-on-the-ground challenges investors face.
Freddie Mac’s SFR Pilot: A Big Idea, Cut Short
Sean reflects on Freddie Mac’s short-lived attempt to serve mid-tier SFR investors: those with about $5 million in rental properties. The program allowed for broader underwriting, especially in smaller markets. However, after public scrutiny and politics got involved, the pilot quietly disappeared.
Nevertheless, it was a pivotal moment. It proved there was demand for a nationwide, agency-backed solution for single family rental portfolios. And yet, private credit lenders filled the gap, albeit not without friction.
The Rise of DSCR Loans: Built for the Real World
In the vacuum left by Freddie and Fannie, DSCR loans surged in popularity. For long-term SFR investors, they offer what conventional lenders can’t: simplicity, speed, and scalability. If a property cash flows, then a DSCR loan works. There’s no W-2 requirement, no personal tax returns, and no need for a credit score that looks like a mortgage banker’s dream.
Dominion Financial, among others, has leaned hard into DSCR financing, offering 30-year fixed rates, in-house underwriting, and even appraisal waivers. Consequently, DSCR loans have become the go-to tool for investors looking to flip and hold, not just fix and sell.
Portfolio Financing: The Missing Middle
Another key point raised in the episode is the current breakdown in financing SFR portfolios—particularly those between 20 to 200 homes. These deals are too big for retail but too small for Wall Street’s appetite.
All things considered, this “missing middle” is tough to execute. Many investors must break up their portfolios or accept higher rates. Until this segment matures, refinancing large single family rental bundles will remain a logistical and financial challenge.
Delinquencies, Spreads, and What’s Next
Jack and Sean dig deeper into the growing complexity behind DSCR loan pricing. Although current defaults remain modest, rating agencies and bond buyers are watching closely. Accordingly, if delinquencies continue creeping up, spreads may widen further, raising costs for SFR borrowers.
Conversely, if market volatility cools and securitizations flow again, pricing could normalize. Yet neither scenario is guaranteed. All in all, today’s lenders walk a fine line between managing risk and staying competitive.
Raising Capital and Winning Institutional Trust
Eventually, the conversation turns toward capital raising. Sean and Jack share candid stories about pitching institutional capital for single family rental strategies. Whether you’re raising $3 million from friends or $300 million from hedge funds, the fundamentals are the same: clarity, consistency, and credibility.
Surprisingly, some of Sean’s toughest pitches were to family and friends. After all, emotion rides high when your friend is wiring his last $50K. But if you bring data, discipline, and a deep understanding of both real estate and finance, then capital follows.
Single Family Rental Is Still Evolving
In summary, the single family rental market is maturing, but still adapting. DSCR loans dominate today’s toolbox, but portfolio financing and capital access remain challenges. Above all, the space continues to reward operators who combine financial fluency with operational grit.
As Sean, Jack, and Craig conclude, one truth is evident: the best SFR investors aren’t just good at finding deals, they’re great at adapting to change.
