The Stabilization Checklist: Is your BFR Community ready for Permanent Financing?

How can BFR / SFR sponsors confidently make the jump from bridge to long-term debt?

In the world of Build-for-Rent (BFR) and Single-Family Rental (SFR) portfolios, stabilization isn’t just a leasing benchmark, it’s the gateway to long-term success. For sponsors, it’s the moment of transition from short-term bridge loans to the certainty of permanent financing, which unlocks a lower cost of debt capital and provides a return of equity for reinvestment into future projects. At Encore Finance, we work with sponsors who don’t just hope their projects are ready. Instead, they measure progress against a clear checklist that Encore Finance uses to underwrite cash-out refinance loans.

1. Predictability is power

To qualify for long-term debt, your community should be at or above 90% occupancy. But occupancy alone isn’t enough, you need to show consistency and structure behind the numbers:

• Track your lease-up velocity and prove that absorption is steady and sustainable.
• Present clean, organized rent rolls. Highlight lease terms, rent levels, and renewal trends.
• Minimize loss-to-lease and concessions. The fewer the discounts, the stronger the story.

2. Financial Performance that Tells a Story

Encore evaluates not just where your project is, but how well it will perform over time. Here’s what we look for:

• Expense ratios in the 30–40% range (as a percentage of Effective Gross Income), depending on market and asset class.
• A minimum 1.20x Debt Service Coverage Ratio (DSCR) based on in-place Net Operating Income.
• Realistic operating assumptions. Anticipate tax reassessments and rising insurance costs, these need to be reflected in your stabilized NOI.
• Market fundamentals. Strong submarket drivers such as rent growth, low vacancy rates, population expansion, and job opportunities reinforce your long-term value.

3. Sponsor Strength and Liquidity

While occupancy and NOI prove the strength of the community, sponsor financials and track record prove the strength of the partnership. Encore packages both sides of the story.

• Liquidity: Guarantors should demonstrate liquid assets equal to at least 10% of the loan amount. This can include cash, bank statements, brokerage accounts, or proceeds from the refinance.
• Net worth: Encore requires a net worth of at least 25% of the loan amount among guarantors.
• Track record: Experience matters. Sponsors who have successfully taken projects from construction through stabilization show they can deliver, again.

4. Planning the Transition Early

The smoothest refinances are planned well before the last unit is leased. The smoothest transitions happen when sponsors engage at around 75% occupancy. At this stage, Encore can help you build a path to stabilization and ensure all parties (lenders, equity partners, and guarantors) are aligned on timing and goals.

• Organize your documentation early. Have your rent rolls, PFS, leases, purchase contracts, and sponsor history ready to go.
• Engage your support team. Title agents, insurance brokers, and legal counsel should be looped in well before closing day.
• Have a rate-lock strategy. Market rates move fast – Encore offers a 45-day rate lock, giving you flexibility and control at the right moment.

5. So… Why Encore?

At Encore, we don’t just check boxes, we create momentum. Our loan programs are designed to be flexible, allowing us to structure each deal around the sponsor’s unique objectives rather than forcing a one-size-fits-all solution. From high leverage to flexible prepayment options, Encore has you covered. From origination to closing, our team work side by side with clients to anticipate challenges, streamline the process, move quickly, and deliver certainty of execution. With a client-first mindset, Encore ensures that sponsors not only secure permanent financing but also build lasting partnerships that position them for long-term success.

So, borrowers, how can we help you?

Fun Fact: In Switzerland, some mortgages are structured for 100 years and can pass down through generations. The idea is that you never really pay it off, you just service the interest, and the property keeps appreciating.