Blanket/Portfolio Loans and buying an 8 unit with a single family next door

[Valerie Bowman]

Hi everyone,

I am looking for advice on a deal I have under contract for 550k in Sandusky, Ohio. It consists of an 8 unit apartment building being sold with a single family home next door to it, each on their own parcel. I am having difficulty finding a lender who can match a loan type as the single family seems to be complicating things. I have been told that systems for blanket loans only allow up to 4 units. Can anyone recommend  a lender in the area who could accommodate this situation?

The seller needs to sell the property for a divorce settlement and initially did not want seller financing. I have been considering asking to buy the single family in cash to separate the deal but would like that amount to be subtracted from the purchase price while keeping the cash I would spend on the down payment the same to include the single family that way the seller gets the same amount of cash upfront. Is this too much to ask for or is there a way to make the numbers work as the single family is already discounted by being included in the sale of the apartment building. 

Thanks in advance!

[Robin Simon]

Quote from @Valerie Bowman:

Hi everyone,

I am looking for advice on a deal I have under contract for 550k in Sandusky, Ohio. It consists of an 8 unit apartment building being sold with a single family home next door to it, each on their own parcel. I am having difficulty finding a lender who can match a loan type as the single family seems to be complicating things. I have been told that systems for blanket loans only allow up to 4 units. Can anyone recommend  a lender in the area who could accommodate this situation?

The seller needs to sell the property for a divorce settlement and initially did not want seller financing. I have been considering asking to buy the single family in cash to separate the deal but would like that amount to be subtracted from the purchase price while keeping the cash I would spend on the down payment the same to include the single family that way the seller gets the same amount of cash upfront. Is this too much to ask for or is there a way to make the numbers work as the single family is already discounted by being included in the sale of the apartment building. 

Thanks in advance!

 Is the eight unit apartment fully turnkey and rented or does it have a lot of vacancy / need some renovation?  Thats going to play a big role in your options i think

[Brandon Croucier]

Hi Valerie,

Theres a few options you could go about, there are a few investors who can blanket the loans but this is going to be more along the likes of hard money, so increased costs.

I don't think the seller would be opposed to amending the contract and allowing you to close separately (assuming the SFR is a applicable value).

[Valerie Bowman]

Everything Is fully rented and turn key with about a 1.5-1.7 DSCR.

[Valerie Bowman]

Quote from @Robin Simon:

Quote from @Valerie Bowman:

Hi everyone,

I am looking for advice on a deal I have under contract for 550k in Sandusky, Ohio. It consists of an 8 unit apartment building being sold with a single family home next door to it, each on their own parcel. I am having difficulty finding a lender who can match a loan type as the single family seems to be complicating things. I have been told that systems for blanket loans only allow up to 4 units. Can anyone recommend  a lender in the area who could accommodate this situation?

The seller needs to sell the property for a divorce settlement and initially did not want seller financing. I have been considering asking to buy the single family in cash to separate the deal but would like that amount to be subtracted from the purchase price while keeping the cash I would spend on the down payment the same to include the single family that way the seller gets the same amount of cash upfront. Is this too much to ask for or is there a way to make the numbers work as the single family is already discounted by being included in the sale of the apartment building. 

Thanks in advance!

 Is the eight unit apartment fully turnkey and rented or does it have a lot of vacancy / need some renovation?  Thats going to play a big role in your options i think

Everything Is fully rented and turn key with about a 1.5-1.7 DSCR.

[Cameron Green]

Dang, this is a good one and I don't have a great answer but I would look at lenders who specialize in commercial or portfolio loans. In Ohio, some banks and credit unions are known for flexibility with mixed-use or investment properties include:

1. Civista Bank - Known in Ohio for its flexibility with investment properties, they may have options for mixed-use financing.
2. Liberty Home Mortgage - Offers a range of loan products, including commercial options that might suit your situation.
3. Huntington National Bank - Has experience in commercial lending and may offer portfolio loans that allow combining the properties.

Asking for a price adjustment for buying the single-family home in cash could be feasible, especially if the seller needs flexibility for the divorce settlement.

[Ross Boesch]

I am pretty confident Civista Bank can get this done. It will be through their commercial department. I am in Sandusky and have a mixed use multi parcel loan with them. It will be a 5/1 ARM though.

If you want to lock in a 30 yr, but with a little higher costs, I've used LimaOne and Visio in this area. 

[Nick Belsky]

@Valerie Bowman

The easiest way to do this would be to have the seller split the two into two separate contracts.  Many lenders don't like to mix two different asset classes in a blanket loan.  Each is underwritten very differently.  Some will do but they tend to be far and few in between and the terms are not very desirable at all.

Another options is to take down the properties with a bridge loan. Once you own them, then you can refi them separately in a year or two. This gives you the chance to do any work needed and/or stabilize the multifamily so you can get optimal terms for your perm financing. The SFR will be easy on it's own. The MF5+ is another story. Since it looks like you are fully occupied and stabilized, you would be able to rate and term these quickly, since bridge loans normally don't have any prepays. But the fact remains that you would be paying for 3 loans essentially. The take down loan, then separate refis for each.

Decisions, decisions...

Cheers!

[Nick Belsky]

Quote from @Ross Boesch:

I am pretty confident Civista Bank can get this done. It will be through their commercial department. I am in Sandusky and have a mixed use multi parcel loan with them. It will be a 5/1 ARM though.

If you want to lock in a 30 yr, but with a little higher costs, I've used LimaOne and Visio in this area. 

LimaOne is restricted to 1-4 units for now.  Visio hasn't done 5+ in ages...

Cheers!

[Jacob Sherman]

can do as 1 loan or 2 but you'll get better financing options as individual rather than blanket 

[Jay Hurst]

Quote from @Valerie Bowman:

Hi everyone,

I am looking for advice on a deal I have under contract for 550k in Sandusky, Ohio. It consists of an 8 unit apartment building being sold with a single family home next door to it, each on their own parcel. I am having difficulty finding a lender who can match a loan type as the single family seems to be complicating things. I have been told that systems for blanket loans only allow up to 4 units. Can anyone recommend  a lender in the area who could accommodate this situation?

The seller needs to sell the property for a divorce settlement and initially did not want seller financing. I have been considering asking to buy the single family in cash to separate the deal but would like that amount to be subtracted from the purchase price while keeping the cash I would spend on the down payment the same to include the single family that way the seller gets the same amount of cash upfront. Is this too much to ask for or is there a way to make the numbers work as the single family is already discounted by being included in the sale of the apartment building. 

Thanks in advance!

It has been mentioned above but your best bet is to separate the SFR and the 8 unit into two separate transactions. BUT, the might cause more issues because 550k is already on the small side for a 5+ unit building product. How much value do think the SFR is adding to the 550k value?

[Trevor Finn]

@Valerie Bowman, interesting setup! For financing, you might look into portfolio lenders or commercial lenders in the area who could be flexible with mixed-use or multi-property deals. Some credit unions or local banks offer portfolio loans that don't stick to the 4-unit limit, which could work well here. As for structuring the deal, proposing to buy the single-family in cash with an adjusted purchase price could be a win-win, especially if you frame it as maintaining the seller's cash position for their settlement. Just make sure it aligns with your cash flow goals—sounds like it's a solid DSCR! Good luck! LMK how I can assist!

[Stacy Raskin]

Portfolio loans generally have a minimum number of properties that are required such as three. They also have terms about release of properties for sale or refinance that are not favorable to the investor. Having the loan as two separate transactions would make the most sense. 

There are DSCR 5-8 unit programs that have 30 year fixed rate terms for DSCR 1 ratios. Minimum $250K loan amount to $2M. 25% down with 720 and above middle mortgage FICO score up to $1.5M. investors need to have experience. More details pertain to the program- that's the broad overview.

More info on DSCR loans generally to better understand how the programs work and what goes into the underwriting:

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Happy to discuss further. 

[Deborah Wodell]

Since the seller needs to sell quickly, one option might be to look into lenders who specialize in mixed-use or multi-property loans. While blanket loans often cap at 4 units, there are some lenders who may be willing to consider both properties together if they understand the full picture of your deal.

Regarding your idea of separating the single-family sale from the multi-unit purchase, it’s not unreasonable to ask for the purchase price adjustment, especially since the single-family home is already discounted in the package. You could potentially negotiate this by structuring it in a way that aligns with the seller's need for a quick settlement, without lowering the cash they’d receive.