A 538 loan is a type of loan that is guaranteed by the Small Business Administration (SBA). The SBA provides loan guarantees to lenders in order to encourage them to lend to small businesses that might otherwise be considered too risky. The 538 loan program specifically provides loan guarantees for the acquisition and development of rental properties, including multi-family housing, senior housing, and student housing.
Using a 538 loan to build a rental portfolio can be a good way for investors to finance the acquisition of rental properties and help them establish a solid foundation for their rental business. These loans typically offer lower interest rates and longer repayment terms than traditional commercial loans, making them an attractive option for investors looking to build a rental portfolio.
To qualify for a 538 loan, borrowers must meet certain eligibility requirements, such as having a good credit score, demonstrating financial stability, and having experience in the rental property industry. Additionally, the properties being acquired or developed with the loan must meet certain criteria, such as being located in a designated underserved area and serving a specific population (e.g. seniors or students).
Overall, a 538 loan can be a useful tool for investors looking to build a rental portfolio, as it can help them finance the acquisition of properties and establish a strong foundation for their rental business.