multi family vs. portfolio of SFR's

[Anita Oakley]

I have purchased multi family properties and SFR's. I am now considering purchasing several townhouses being offered as one investment as a package. From my understanding (which is certainly inexperienced with this particular type of investment) the loan would include all 15 townhouses, but I would be able to have separate deeds for each one so that I could sell off one at a time if I wanted to. This seems much more flexible as far as exit strategy goes. Can anyone add additional information that may help me to weigh out whether I should consider this option, or stay with multi units instead?

[Joel Owens]

You usually have a blanket loan for the townhouses. These are popular with condo conversion properties where they were turned into multifamily rentals but now make sense to sell at a higher price one by one.

The loan agreement will usually spell out that for each one you sell they release the lien on that one property and so much of the sale has to go down to retire the overall loan out of the proceeds. 

So what the lender is basically saying is they will not allow you to take all profit and leave a high loan balance while releasing some of the collateral. They want the balance to get paid down in proportion to the number of properties left.