Pros/Cons of Portfolio vs Individual Loans in Commercial Lending?

[Daniel Dietz]

Hello,

We are getting close to finalizing a loan(s) for a set of 3 duplexes we are buying within our LLC. The properties are all similar in value and have a total value of about 500K. We are able to get terms of 20% down, 4.5%, 25 year amortization and a 10 year lock. Only max of 1% rate hike per year after that.

Our lender is offering us the option of doing one "blanket loan" that would encompass all the properties, or doing an individual loan on each one. The loan 'fees' are under 1K per loan. Appraisal, title search, etc.. would be needed either way.

What do you more experienced investors or financial types see as pros and cons to each way?

I see the benefit of a blanket loan in that once the properties appreciate or are paid down enough that is would be easier to roll that equity as one 'bunch' into a new property. I see the con as extra paperwork needed if we want to sell one property off. 

I see the benefit of individual loans as it is easier sell of a property if desired. 

What are all of your thoughts?

Thanks, Dan Dietz

[Ralph R.]

Daniel Dietz I wrestled the same problem a while back. I couldn't justify it. The savings for 1 loan verses 3 was neglegable. Other than that there is no other reason to do it. It complicates the sale of a single property and if you do sell only one property whose to say they won't want to write a whole new loan on the remaining properties changing interest rates or terms on the remaining properties? It also complicates things if you are wanting to do any type of cash out refi in the future. I wondered if you would need new appraisals on the remaining properties to guarantee enough value to secure the remaining loan balance. I guess what I'm trying to say is I didn't want to give up flexibility for the sake of a few dollars saved on closing costs. I got individual loans. RR