Purchasing Multiple Properties at once which are Multi-Family units

[Jay O.]

Hello everyone.

Thoughts on structuring this deal. What to look for? What to be aware of? Simplest way to put it together. Suggested steps to take or a great general outline from beginning to end. Advice from anyone who knows or has purchased Multiple Properties at once. Advantages/Disadvantages if any.

Going to be the first Multifamily purchase. It would be working with one lender, or possibly two. Purchasing all properties at the same time. Properties reside in different locations within the same area.

Working on structuring a Multi-Property deal, consisting of Multifamily units on the East Coast. Total of 4 Multifamily units. Some rehab, some in, move in condition. Would like to know also if one lender or a lender for each property works better. Just wanted to ask the incredible experienced BP community the best way to execute such a deal. Maybe also run some numbers for me. Putting 25% down on each property. Putting aside reserves for each property also. As far as insurance goes, get a Individual or Umbrella policy? Efficient and cost effective strategy. Hope Ive given enough details. I'm sure you guys/gals understand the kind of deal I'm asking advice about the best and safest way to put it all together. Thanks everyone. Looking forward to hearing from you all.

Gratefully,

Jay

[Bill Gulley]

Jay, Jerry made some very good points, as always, as to the loan(s). If you use one entity you could do one loan and close on all properties at the same time. But, as Jerry mentioned his not liking that, that is a valid issue. Blanket loans can really tie you up and you become a captured borrower to that lender.

If you are buying separately over time, you could spread it around. The issue here is that buying several at the same time it's much better to go to one lender. I'm assuming all the properties are in the same lending area of one lender. When you have simultaneous deals going on all lenders are aware of your other contracts and loans in process, but they don't know the details of each deal nor do they know if you'll be approved and those other transactions effect how your application is viewed and/or approved. It also plays on the lender as seeing that you'd rather do business else where and that might be what they tell you to do.

You also won't be coordinating closings at the same time with various lenders, that would be hard to accomplish unless you waited on the last lender ready to fund.

So, buying multiple properties you need to have one lender as your main source. Now, if it's a big deal, one lender can invite other affiliate lenders or even competing lenders to join in the participation with your bank being the "lead lender".

Also, you'll have one lender managing the proposed transaction, coordinating requirements on all the properties, appraisals, inspections, engineer reports if any, title work, escrows, insurance and closing requirements, it will be much cleaner to facilitate with multiple properties.

You can use one contract to list all properties. Each will be viewed separately. Title insurance will be under separate policies. Your insurance can be as Jerry suggested as well. One closing can close all the properties purchased, negotiate with the title and settlement agent on a better deal.

If you use separate entities, you can still use the same lender, that isn't an issue, but those costs in settlement to the closing under different entities will more than likely be higher as each will be separate files. One entity will probably be cheaper. If your state has a Series LLC, you might consider looking into that as your structured entity.

If the lender wants to do the whole deal under one loan, you can go there, costs may be less, but ensure that you get a release fee for each property, so that later on you can refinance or sell one property without having to reduce amounts owed on the entire loan. If you are trying to get rehab funds as well, a bank may want to go with one future advance loan.

You can certainly shop different lenders, choose wisely as rate and terms are important, but so is the lender that can actually do the deal, keep that in mind as well. Generally, you'll have fewer issues with loan policies changing and tightening up loan limits with a larger bank. There could be an issue with a loan concentration to one borrower with a smaller bank too.

Overall, use one lender, separate loans at the same closing. Good luck :)